
Class S5"<bT_ 

Book ."B5^ 
Copyright N" 



COPyRIGHT DEPosrr. 



PRINCIPLES OF BOOKKEEPING 



AND 



FARM ACCOUNTS 



BY 



J. A. BEXELL 



I' 

DEAN SCHOOL OF C'OxMMERCE, OREGOX AGRICULTURAL COLLEGE 
CORVALLIS, OREGON 



F. G. NICHOLS 



DIRECTOR BUSINESS EDUCATION, DEPARTMENT OF PUBLIC INSTRUCTION 
ROCHESTER, N. Y. 



SCRIPT ILLUSTRATIONS BY E. C. MILLS 



AMERICAN BOOK COMPANY 

NEW YORK CINCINNATI CHICAGO 



9561 



Copyright, 1913, by 
J. A. BEXELL AND F. G. NICHOLS. 



Copyright, 1913, in Great Britain. 



)CI.A346726 



PREFACE 

Farming is the oldest and in many respects the most important occupation 
of man. It dates back beyond the dawn of history, yet one of the modern 
"Captains of Industry" recently remarked that "Farming is the most modern 
business in the world." This is certainly true as regards the application of 
sound business methods. 

In the mad rush for wealth and power, we seem to have lost sight of the true 
principles of economy. One of these principles is the art of keeping accounts. 
One of the greatest authorities on bookkeeping says, "The ability to pre-deter- 
mine results by means of accurate accounts and statistics is the highest develop- 
ment ot the modern business man." That the farmer needs to develop the same 
ability to " pre-determine results" needs no argument. Very few farmers of 
to-day have a definite knowledge of their business. 

Farm accounts must be simple, easily kept, and readily understood to make 
them effective and practical. Hon. James Wilson says: "I Avould not impose 
on a busy larmer the keeping of an elaborate set of books, but some simple 
form of accounts will be a great aid in successful farming." Mr. John Ham- 
ilton, Farmers' Institute Specialist, says: "In my judgment no single study 
outside of the essential branches of writing, reading, and arithmetic would be 
of more service than the study of an efficient method of keeping accounts. 
It is a universal need." 

In TJie Country Gentlemen magazine, the following clear statement of the 
need of up-to-date business methods for the farmer is made : " Business methods 
are indispensable. The man who does not know what his annual income is 
should wake up and find out. Only bookkeeping will do the trick. After he 
has adopted it he may discover that he has been relying on some one crop to 
make up for the deficiencies of others. Then his sins of omission will rise up 
against him like a nightmare and he will be convinced that business is business 
just as truly as farming is larming — and that the latter cannot thrive without 
the lormer." 

3 



4 PREFACE 

The authors and pubHshers ot this book feel that this great need can best be 
met by introducing bookkeeping and business methods in both graded and 
ungraded schools where there are boys and girls who are looking forward to 
agriculture as a life work. They realize that they are attempting pioneer work 
and therefore lay no claim to penection. It is their hope that they have to some 
extent, at least, met the present need for a textbook of this kind, and laid the 
foundation for better work along this line in the future. 

The forms and bookkeeping methods which they have used have stood the 

test of extensive use and are put lorward with full confidence that they will be 

found satisfactory for purposes of instruction and equally satisfactory for actual 

farm use. 

J. A. BEXELL, 

F. G. NICHOLS. 



CONTENTS 



PAGE 



Introductory 7 

LESSON 

1. Ruling and Preparing Forms 8 

Private Personal Accounts : 

2. Student's Accounts 9 

3. Student's Accounts — Continued ......... 13 

4. Household Accounts 17 

5. Review Questions, Lessons 1,2,3,4 21 

6. Poultry Accounts 22 

7. Financial Statement 26 

8. Review Questions, Lessons 6, 7 . . 29 

9. Principles of Double Entry 30 

10. Model Double Entry Set, Journal 36 

11. Review Questions, Lessons 9, 10, and Model Ledger 45 

12. Stock Set, Journalizing 46 

13. Stock Set, Posting 48 

14. Stock Set, Trial Balance and Balance Sheet 50 

15. Stock Set, Closing the Ledger 52 

16. Review Questions, Lessons 12, 13, 14, 15 54 

17. Produce Set 56 

18. Produce Set, Financial Statement 57 

19. Produce Set, Closing Ledger 57 

20. Special Balance Sheet Exercise No. 1 57 

21. Special Balance Sheet Exercise No. 2 58 

2L Special Balance Sheet Exercise No. 3, Supplementary . . . .58 

22. Special Closing Ledger Exercise No. 1 59 

23. Special Closing Ledger Exercise No. 2 60 

23. Special. Closing Ledger Exercise, Supplementary 60 

24. Six-column Balance Sheet 61 

25. Review Questions, Lessons 19, 20, 21, 22, 23 62 

26. Bills Payable and Bills Receivable 64 

27- Special Exercise on Bills Payable 65 

5 



CONTENTS 



28. 
29. 
30. 
31. 
32. 
33. 
34. 
3.5. 
36. 
37. 
38. 
39. 



40. 
41. 
42. 

43. 
44. 
45. 
46. 
47. 
48. 
49. 



50. 
51. 
52. 
53. 

54. 
55. 



56. 



Special Exercise on Bills Payable and Bills Receivable 
Review Questions, Lessons 26, 27, 28 

Banking 

Review Questions, Lesson 30 

The Business Letter .... 

Review Questions, liEssoN 32 

Business Forms and Office Equipment 

Review Questions, Lesson 34 

Introduction to Farm Set I 

The Farm Plot for Farm Set I 

The Special Farm Cash Book, with Transactions 

Farm Set I — Continued 

Financial Statement. 

Cash Statement. 

Analysis of Profits and Losses. 

Summary of Profits and Losses. 
Farm Accounts with Persons .... 
Special Exercises on Financial Statements 
Review Questions, Lessons 36, 37, 38, 39, 40, 41 
Farm Set II, Introductory 

Partnership Agreement and Inventory 

The Farm Plot 

The Cash Book — Ledger, with Transactions 

The Cash Book — Ledger — Continued 

Valuation and Depreciation 

Special Cost Records .... 

Labor Report. 
Feed Record. 

Cost Accounts of Crops ...... 

Cost Accounts of Live Stock 

Cost Summaries ....... 

The Annual Statement 

Review Questions, Farm Set II ... . 
Short Mercantile Set, Farm Implement Business 

Cash Book. 

Journal. 

Sales Book. 

Purchase Book. 

General Ledger. 
Review Questions, Lesson 55 



66 
68 
69 
73 
74 
79 
80 
90 
93 
97 
102 
106 



109 
112 
113 
115 
117 
123 
125 
137 
142 
146 



151 
157 
159 
161 
164 
167 



Index. 



177 
181 



PRINCIPLES OF BOOKKEEPING 



INTRODUCTORY 

1. A business transaction is an exchange of values in the form of property 
or service. Thus it will be seen that a gift is not, properly speaking, a business 
transaction. 

2. If one's business consists of only a few transactions, it may not be necessary 
to record them, but if the transactions are many, it is not safe to trust to memory. 
They should be properly recorded in books arranged conveniently for this pur- 
pose, and the art of making such records is called bookkeeping. 

3. It is often necessary to show other people facts about our business trans- 
actions, and this can be done only by means of accurate records. • Young people 
should early cultivate the habit of making records of daily receipts and expen- 
ditures, and also of all credit transactions. Such a practice will serve as a check 
on extravagance and inculcate systematic business habits that will be of incal- 
culable value in later life. 

4. Bookl-oeeping, as is stated above, is a systematic record of business trans" 
actions. The objects of keeping books are to preserve a permanent history of 
a business and to be able, at any time, to determine its exact financial condition. 
Properly kept records also furnish us details of business that show one who 
knows how to interpret them just where the gains are being realized and where 
losses are being sustained. Annual comparisons make it possible to conduct 
business more intelligently and to produce profits that justify the expenditure 
of labor and money. 

5. All records that are made at the time the transactions take place for the 
purpose of being summarized later under appropriate heads, are known as original 
records. In case of legal disputes between the parties to such transactions, these 
original records are the only ones that are accepted as evidence in a court of 
law, and they are accepted only when properly made. There must be evidence 
of accuracy and system, therefore all bookkeeping work should be done with the 
greatest possible care. Aim to be neat and accurate in your work — speed will 
be a natural and necessary result for which you need not consciously strive. 

7 



PRINCIPLES OF BOOKKEEPING 




Illustration O 



LESSON 1 
RULING AND PREPARING FORMS 

6. A great many bookkeeping forms are standard and can be purchased 
from stationers almost anywhere, but often it becomes necessary to prepare 

labor-saving records especially suited to a 
particular business. To be able to design 
a suitable form and to rule it properly is 
a valuable accomplishment. As in all 
mechanical work, proper tools are of the 
utmost importance. For the next exercise, 
you will need the following : A sharp pencil, 
two penholders with medium fine pens, a 
ruler, red and black fluid (not ink), a sheet of 
horizontall;)' ruled paper, and a clean blotter. 
7. Always keep your pencil well sharp- 
ened. L^se neither too hard nor too soft 
lead. The pen points of a new pen should 
be moistened and thoroughly wiped before 
using, because each pen was oiled before it was packed, to prevent rusting. 
The beveled edge of the ruler is used for ruling. See illustration O. 

Written Exercises 

(1) Place the sheet of blank paper so that the lower edge is parallel with the 
edge of the table or desk. Place the ruler with the numbered edge toward you 
(A) and the sharp edge down. Along the beveled edge (B) rule as many red 
lines as you can without moving the ruler, by merely tipping the pen. You 
will rule a better line by drawing the pen rapidly and lightly. Practice until 
you can rule a perfectly smooth and straight line. 

(2) Rule a dozen lines with lead pencil and then trace them with the red 
ink pen. See how truly and smoothly you can do the tracing. 

(3) Rule a red line on either side of each blue line on a sheet of horizontally 
ruled paper. Draw the red lines as close as possible to the blue line without 
having the lines touch each other. Use the blotter freely. 

(4) On a slip of paper 8 inches wide, plan the form shown in illustration 1^ 
page 10. Allow f inch for each cents column and f inch for each of the dollar 



PRIVATE PERSONAL ACCOUNTS 9 

columns. Now from your sketch mark the spaces at the top and 15 Unes below 
on a horizontally ruled sheet, and then rule the form completely with red fluid. 

(5) In a similar manner rule the forms shown in illustrations 2 and 3, pages 
14, 15, 18, and 19, using ^ of a page for each form. Use both sides of the paper. 

Hand in your work for approval. 5 lines long 

LESSON 2 
PRIVATE PERSONAL ACCOUNTS 

8. The foundation for business success should be laid early by learning the 
value of money and its correct use. All successful business men agree that this 
can best be done by systematically recording our cash receipts and expenditures, 
and by mastering the art of bookkeeping at an early age. 

9. It should be remembered that all the advantages and comforts we enjoy 
are the results of labor and saving. There could be no civilization, no comfort- 
able homes, no schools, no churches, no enjoyments without saving. Savings 
are generally measured in money, and it is, therefore, regarded as one of the 
most desirable forms of property. 

10. We can learn many important lessons from the experience of suc- 
cessful business men ; how they laid the foundation of their business success. 
Countless illustrations could be given from every walk of life. Successful 
farmers, merchants, manufacturers, and bankers all agree that the four 
fundamental principles of their success are : (1) Labor, (2) Business Enter- 
prise, (3) Skill and Knowledge of One's Business, and (4) Economy or 
Saving. 

11. Knowledge of one's business is gained primarily from records and 
accounts, and true economy is generally the result of carefully analyzing these 
records. It is not only the actual information the accounts and records afford, 
but the attitude toward one's business and the indirect effect which are the most 
important results of carefully kept accounts. 

12. In order that the accounts shall be of greatest value, it is of the utmost 
importance that a correct classification be made. One must decide in advance 
Just what information is desired and then arrange the records accordingly, just 
as the architect prepares his plans before he begins building. 

13. In the personal accounts illustrated in lessons 2 and 3 the different 
classes of receipts and expenditures are printed at the head of the columns, as 



10 



PRINCIPLES OF BOOKKEEPING 



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Illustration 1 

in illustrations 1 and 2, pages 10, 14, and 15, and the results are found in the 
totals of the different columns. 

14. In the next exercise we shall use what is known as a special column cash 
book. All the columns except the totals are called distribution columns. Note 
that the sum of the footings of the distribution columns equals the footing of 
the total columns. Every page should be proved before the amounts are for- 
warded. It is generally best to forward the total amounts from month to month 
until the end of the year. 

Rockefeller's Ledger 



Speaking of his early struggles and of the foundations of his success at a 
social gathering of young men, Mr. Rockefeller said : 

" I have brought with me to show you young men a little book — a book 
which may interest you. It is the first ledger I kept. I was trained in business 
affairs and I was taught how to keep a ledger. The practice of keeping a little 
personal ledger by young men just starting in business and earning money and 
requiring to learn its value is, I think, a good one. . . . 

" This little book shows largely what I received and what I paid out during 
my first years of business. 



PRIVATE PERSONAL ACCOUNTS 11 

" I paid my own bills, and always had a little something to give away, and the 
happiness of saving some. It is true I could not secure the most fashionable 
cut of clothing. I did not make any obligations I could not meet. I lived 
within my means, and my advice to you young men is to do just the same. 

"Now let me leave this little word of counsel for you. Keep a little ledger, 
as I did. Write down in it what you receive, and do not be ashamed to write 
down what you pay away. See that you pay it away in such a manner that your 
father or mother may look over your book and see just what you did with your 
money. It will help you to make money, and that you ought to do." 

Written Exercise 

Below are the receipts and expenditures of a young girl during the first 
three months of school, eighth grade. In making her purchases she was assisted 
by her mother, but she kept her accounts just as if she had made them inde- 
pendently. The experience proved a valuable lesson, as it showed her how much 
she cost her parents. 

Directions. On a practice sheet rule vertical lines as in illustration 1, 
page 10. 

With a ruler mark the spaces on a separate slip of paper | inch for each 
cents column and f inch for each dollar column, or f inch for each money 
column. This will require 5f inches of the right side of your page ; f inch 
will be required for the date column at the left. The remainder of the space 
will be the items column. Place the slip at the top of the page and mark the 
ines to be ruled ; do the same at the bottom. Now complete the ruling which 
may be done in pencil in this exercise. Write the present year at the top of 
the date column and then fill in the transactions with not more than two 
entries on each line. The first five lines will be exactly as illustrated. 

Transactions 

Date 
Sept. 20 — Cash from mother, $ 20. 

20 — Coat, $ 10.50 ; books, $ 1.50. 

25 — Shoes, $ 3.50 ; post cards, 10]^, 

26 — Amusement, 20 ^ ; candy, 10 i. 
28 — Church, 5 p. 

30 — Ink, 5 ^ ; eraser, 5 ^. 



12 PRINCIPLES OF BOOKKEEPING 

Oct. 1 — Medicine (sundry column), 50^. ' 

2 — Ice cream, 10 ^ ; ribbons, 30 i. 

3 — Pencils, 10 f. ; paper, 10 i. 

6 — From mother, $ 7. | 

8 — Church social, 15 ^ ; nuts, 10 ^. 

9 — Ball game, 50 ^. 

11 — Necktie for brother, 25^. 

12 — Umbrella, $ 1.50 ; cap, 50 i. 

14 — Oranges, 10^; skating, 10^. 

15 — Notebook, 10 ^ ; picnic, 25 ^. 

16 — C. Endeavor, 10 f^ ; Sunday School, 5 ^. 

19 — Rubbers, 65 ^. 

20 — Book, 85^; carfare, 10^; pictures, 15^; handkerchief, 25 ^. 

24 — Sunday school, 5]f5. 

25 — Tablet, 10 (j:. ; pens, 5 ^. 

28 — Entertainment, 25 ^ ; candy, 15 <j:. 
Nov. 1 — Medicine, 75 i ; gloves, 25 i. 

3 — Pencil, 5 ^ ; skating, 10 ^. 

4 — Cash from mother, $ 9. 

5 — Sunday school and church, 20 <ji. 

7 — Sandwiches, 15 ^ ; popcorn, 5 i. 

8 — Stockings, 50 ^ ; dress, % 2.50. 
11 — Tablet, 5^; eraser, 5^. 

15 — Church social, 15j/5; ribbon, 10^. 

16 — Amusement, 20 ^. 

17 — Car fare, 10 i ; stamps, 10 i. 
19 — Paints, 25 ^ ; cookies, 10 i. 

22 — Missions, 20 ^ ; Y. W. C. A., $ 1. 

26 — Stationery (gift to George), 50 j:^. 

27 — Notebook, 15 ^ ; ink, 5 ^. 

29 — Ice cream, 20 i ; candy, 10 ^. 

Now total each column and write the sum in light lead pencil figures until 
found correct. Prove your work by adding together the totals of all the 
columns to the right of the total column. This should equal the sum of the 
total column. When found correct, write the totals in ink. 

Hand in your exercise for approval. When it is returned to you, copy it on 
the ruled sheet provided for the records of this lesson. 



STUDENTS' ACCOUNTS 



13 



LESSON 3 

STUDENTS' ACCOUNTS 

15, Henry Jones, having iSnished his high school course, has now entered 
college. His father has promised to advance two thirds of his expenses on 
condition that he report at the end of each semester his receipts and expen- 
ditures on the following form : 



Cash Account from 



RECEIPTS 



TO 



191 



PAYMENTS : 



For work 
From home 
Unclassified 



For board and room 

For clothing 

For laundry and toilet 

For fees and dues 

For books and stationery 

For furniture 

For amusements and 

refreshments 
For travel 

For doctor and medicine 
For church and benevolence 
For gifts 
For savings 
For unclassified 

Balance 



16. For the purpose of enabling him to fulfill the conditions, he has adopted 
the form of cash book shown in illustration 2, pages 14 and 15. 

17. In the "Board and Room" column are entered all regular expenses 
under this head, but no extra lunches or refreshments. Under "Cloth- 
ing" are entered purchases and mending, but not pressing and cleaning, 
which are entered under "Laundry and Toilet." The remaining columns 
are self-explanatory, except the "Unclassified" column; in it are entered 
all items which cannot properly be entered in the special distribution 
columns. 



14 



PRINCIPLES OF BOOKKEEPING 



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Illustration 2 

18. For convenience, the receipts are enterea on the left, or debit side and 
the payments on the right, or credit side. A total column is provided for both 
the receipts and expenditures. 

19. It is preferable to carry the totals forward until the end of the year, 
rather than to forward only the balance. 

Written Exercise 

Directions. Unless ruled paper is provided in your outfit, you will rule the 
form shown in illustration 2, pages 14 and 15, on a double page of practice 
paper, first, with pencil, and have it approved, and second, with pen and ink. 
Allow the same space for the money columns as in the last lesson. Write 
or print the headings very plainly. 



STUDENTS' ACCOUNTS 



15 



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Illustration 2 

You will then write up the receipts and payments for a part of September and 
all of October, present year. September 20 to 26 will be exactly as illustrated. 

Transactions 

Sept. 20 — Amount of cash on hand, $53.40. (In both the total and un- 
classified columns.) 
20 — From home, $ 100. 

20 — Entrance fee, $ 7 ; barometer, $ 1 ; laboratory fees, $ 5.50. 

21 — Board and room, 9/20 to 10/4, % 10; baggage transfer, 25^. 

23 — Textbooks, $ 7 ; stationery, 55 ^. 

24 — Laundry, 60 i ; shoes repaired, % 1 ; mother's birthday gift, $ 1. 

25 — Library table and chair, $ 5 ; theater, 75 ^ ; paid Students' Loan 

Fund and interest, % 25.75. 



16 PRINCIPLES OF BOOKKEEPING 

25 — Jefferson Club, $ 1 ; dentist, $ 2 ; haircut, 35 f.. 

26 — From Uncle Ben, $ 10 ; splitting wood, $ 5 ; trip to Eugene, $2.35 ; 

Y. M. C. A,$l. 
30 — Accident insurance, $ 2.25 (policy $ 1000). 
Oct. 2 — Gloves, $ 1.10 ; book, 95 ^ ; post cards, 30 ^. 

3 — Laboratory apron, 35 ^. 

4 — Jefferson Club, S 1 ; dentist, % 2 ; board and room, $ 5. 

5 — Films, 50(2^; dictionary stand, $3.50; laundry, 75^; medicine, 

25 f, ; car fare, 15 <jt. 

7 — From H. C. Smith for work on lawn, $ 5. 

8 — Football game, 50 ^ ; Y. M. C. A., $ 1. 

10 — Suspenders, 75 (^ ; kodak developer, 30 ^. 

11 — From home, $ 50 ; savings bank, $ 10. 

12 — 10 shares Student Cooperative, $10; board and room, $5; from 

C. R. Brown for care of furnace, $ 10. 

14 — Fraternity dues, $ 1 ; stamps and paper, 50 ^. 

15 — Trip home for Thanksgiving, $ 6.30 ; kodak supplies, $ 1. 

16 — Laundry, 75^; barber, 50^. 

17 — Car fare, 20 i ; board and room, $ 10. 

18 — Hat, $3; medicine, 25 ^. 

19 — Lunch, 60^; bath sponge, 50^. 

21 — Typewriter, $ 4.80 ; college annual, % 2.50. 

22 — Fees for chemicals, 75 ^ ; bay rum, 25 ^. 

23 — Developing paper, 75^; Wells's Anal. Geom., $1.25. 

24 — Necktie, 50 ^ ; suit pressed, $ 1 . 

25 — Loaned to E. R. Jones for 1 mo., $ 10. 

26 — Junior Party, $ 2 ; shoe polish, 25 jz^ ; tj^pewriter rental, $ 3 ; music 

lessons, $ 5. 
28 — Typewriting, $5; care of furnace, $5; World's Work, $1.50; 
Success Magazine, $ 1 . 
Prove the payments. The sum of the footings of the distribution col- 
umns must equal the footing of the total column. Prove the receipts 
in the same manner. 

What per cent of the total receipts is the total amount received from home ? 
The amount received from work ? The unclassified ? What per cent of the 
total payments is the total of each payment column ? 
Hand in your exercise for approval. 



HOUSEHOLD ACCOUNTS 



17 



Optional Exercise 

Prepare a record sheet, similar to the one just completed, and keep a record 
of your own cash receipts and expenditures for the balance of the school year, 
and submit it to your instructor for credit. Prove the work at the end of each 
page before forwarding the totals to the next. 

LESSON 4 
HOUSEHOLD ACCOUNTS 

20. In a recent experiment in New York City, it was found that, if a family 
would regularly estimate in advance the amount to be spent per year for the 
several classes of expenditures in the average family, greater economy and a 
better living would result. 

21. Below is a table of suggested percentages of expenses in families of five 
members: 



Amount to Spend 



Ideal division ^ 
$2000 to $4000 
$800 to $1000 
$500 to $800 
Under $500 . 



Total 


Food 


$100 


$25 


100 


25 


100 


30 


100 


45 


100 


60 



Rent 



20 
20-25 
15-20 

15 



Gen. 


Cloth- 


Exp. 


ing 


$15 


$15 


15 


20 


10 


15 


10 


10 


5 


10 



Recrea- 
tion 

$25 

20 
25-20 
20-15 

10 



22. The student should study the above table and compare the results with 
his mother's estimates of her family expenses. 

23. In the exercise which follows, it is assumed that the family consists of 
the parents and three children. The eldest daughter. Coral, has become inter- 
ested in home management and has decided to keep accurate accounts of the 
family income and expenses. 

24. The household has a cash allowance of $75 per month and the income from 
the garden and poultry. The total extra income is about $200 a year, counting 
the produce used by the household. All the household expenses, clothing, 
furniture, recreation, etc., are to be paid out of this income. Thus far it has 
been possible to save $10 a month, which is placed in the local savings bank at 
four per cent compound interest. 

1 Where the income is sufficient to warrant it. 



18 



PRINCIPLES OF BOOKKEEPING 



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Dlustration 3 

25. The monthly bills should be filed in an envelope and preserved for future 
reference. This is especially important in the case of bills for furniture and arti- 
cles which should be included in the annual inventory. Write the month and 
year on the envelope and file it in a suitable box or tray provided for the purpose. 

Written Exercise 
Directions. If a ruled sheet is not provided, rule on a double page of 
horizontally ruled paper the form shown in illustration 3, pages 18 and 19, and 
write up the following transactions in the same manner as in lessons 2 and 3. 

Transactions 
Nov. 1 — Balance on hand, $ 35.40. 
1 — Monthly allowance, % 75. 
1 — Sugar, $ 1 ; bacon, S 1 . 

3 — Sold 5 doz. eggs to Klines at 35 jzS ; shoes, $ 3.50 ; concert, $ 1. 
3 — Hdkf ., 25 ^ ; gift books, $ 2.35. 
7 — Collection, 25 ^ ; telegram, 60 ^ ; meat, 50 ^ ; butter, 80 ^ ; trip to 

Albany, $ 2 ; hair cut, Eddie, 35 ^. 
7 — Sold potatoes, $5; sold 7 doz. eggs, $2.40; dress, $4; collars for 

Ella, 40^; medicine, 50^; mittens, 50^; salt mackerel, 55^; 

flour, $1.25; gloves, $2; stationery, 50 (/i; meat chopper, $1; 

dishes, $ 2.75. 



HOUSEHOLD ACCOUNTS 



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14 — Collection, 25 i ; laundry, $ 1.65 ; help, $ 3 ; light, % 1.20 ; magazine 
binder, 75^; stamps, 25]^ ; k. chairs, $ 1.30 ; cleaning, $4. 

17 — Books, $2.40; stove polish, 10^; concert, 40^; rubbers, 60^; 
butter, 80^; L. A. Society, 50,^; doctor, $1. 

22 — Sold 10 qt. canned raspberries, $ 2.50 ; to Dayton, % 1 ; coffee, 90 ^ ; 
roast, 75 i ; taffeta, $ 5.60 ; waffle iron, $ 1.10 ; help, $ 2.65. 

24 — Coal, $2.50; cards, 60^; vaccination, 75^; gasoline, 90^; heat- 
ing stove, $ 13 ; butter, 80^ ; laundry, % 1 ; waist, $ 2.50. 

26 — Sold lO^qt. strawberries, $|2.50; sold 2 pullets, 80 f^; fruit, $4.15; 
steak, 40 ^ ; sausage, 20 i. 

26 — Hat, $4; beans, 50^; telephone rental, $1; e. 1. globes, 50^; 
stationery, 50 ^ ; rocker, $ 7.50 ; help, $2. 

29 — Club, $2;' toweling, 70 (/^; shoes for J., $2.75; savings bank, 
$10; Ella, $1; George, 50^; butter, 40^; doily for M., 
20 (^; liniment, 25 ^ ; flypaper, 10 «f; Madrid and return, $2; 
B. powder, 50^; candles, 10^; paper, 25^. 

Prove the work. The sum of the totals of the payment distribution col- 
umns must equal the amount of the total column. Prove the receipts in the 
same manner. 



20 



PRINCIPLES OF BOOKKEEPING 



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Optional Exercise 

A. Take a complete inventory of your mother's household goods, giving as 
nearly accurate prices as possible. Classify them under the following headings : 
Furniture, Utensils, Library, Clothing, Unclassified. Write down the items 
under each class on a separate slip and then copy them on journal paper in the 
form shown in illustration 4, page 20. 

Ascertain how much fire insurance your father is carrying on the household 
goods. If your father's house and the contents should burn, he could secure from 
the insurance company only so much damage, as he could prove he had sus- 
tained up to the amount stated in his policy. He could scarcely be expected 
to remember all the many items of furniture in the house, therefore this inven- 
tory you have made should be kept on file somewhere outside of your home and 
in case of fire it will be extremely valuable in proving the amount of loss. 

B. Ask your mother for permission to keep her accounts on the plan outlined 
in lesson 4 for the next year. Special credit will be given for this work. 



REVIEW QUESTIONS 21 

C. Take an inventory of all the supplies and equipment in your school or in 
your department. The instructor will assist you in fixilig prices. Classify under 
the following headings : Furniture ; Apparatus ; Books, Charts, and Maps ; 
Supplies ; and Miscellaneous. Use the same form as in the household inventory. 

D. Prepare an expense record for the school with the same classification as the 
inventory and such other additional headings as the teacher may suggest, and re- 
cord the expenditures !'or the school reported from time to time by your nstructor. 

LESSON 5 
REVIEW QUESTIONS 

On- Lessons 1, 2, 3, and 4 

(The number of the question corresponds to the number of the paragraph 
answering the question.) 

1. Name one important kind of business transaction. 

2. State two ways of keeping track of business transactions and point out 
the advantage of each. 

3. What is the peculiar advantage of written records of business transactions ? 

4. Define the term "record" and illustrate. Define "bookkeeping." 

5. What are "original records" and what is their peculiar value? 

6. Why is it important to be able to construct special records and do proper 
ruling ? 

7. What important points should be remembered in reference to stationery 
and tools ? 

8. Discuss the importance of early learning the correct use of money. 

9. How are the comforts we enjoy secured ? Discuss the importance of 
saving. 

10. What are the fundamental requirements of success ? 

1 1 . What is the value of proper records besides the results they contain ? 
13-14. What are the distribution columns and how are they used ? 

17. State what is entered in the several columns in lesson 2. 

18. Why are the receipts entered on the left and the payments on the right ? 
What is the advantage of the total columns ? 

25. How should the monthly bills be filed and preserved ? 



22 



PRINCIPLES OF BOOKKEEPING 



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LESSON 6 



POULTRY ACCOUNTS 



26. The preceding lessons were devoted entirely to cash receipts and expen- 
ditures, since the object of private accounts is merely to record the use we make 
of our money. 

27. In every productive business, however, it is very important to know at 
all times the cost of producing a given article so as to avoid losses and insure 
permanent success of the business. 

28. The process of finding the exact net cost of any article or service is called 
cost accounting. 

29. There are four elements which enter into the cost of anything you make> 
buy, or sell : (1) Labor, (2) Material, (3) Capital, (4) Enterprise. All must be 
accounted for, in order to find the true cost of an article. 

30. The story of hoAV Clarence Hogan of Portland, Oregon, won $100 in 
gold for excellence in work connected with the "Portland Junior Poultry Asso- 
ciation" should be interesting to every boy. In judging the contest, good record 
keeping was given 20 points and good business methods in marketing was given 



POULTRY ACCOUNTS 



23 



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Illustration 6 

10 points out of 100. With an average of 22 chickens and 1 rooster he made a 
profit of $62.10 and won % 100 besides for his enterprise and attention to business. 
His letter to Professor Dryden in regard to his work is so interesting and 
suggestive that it is given below : 

Professor James Dryden, 

Corvallis, Oregon. 
Dear Sir : 

Boys and girls should raise chickens in the city as well as on the farm because 
it pays well and is a fine occupation. It is a M'ork that never grows tiresome and 
new experiences are always awaiting you. Various theories are advocated as 
to the proper manner of housing and feeding to get the best results, but simple 
rules are the best to begin with. Plenty of clean water, clean houses and yards, 
and good feed , are needed to get the best results. Spade up a little in the chicken 
yard every day that it is pleasant, but if it is cold and wet weather provide a 
scratching shed. Keep your hens busy. Read the bulletins furnished free by 



24 



PRINCIPLES OF BOOKKEEPING 



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lUustration 7 

the government and the various experiment stations. Also subscribe to a good 
poultry paper. The ideas you will get from these, together with your own expe- 
rience, will make you a successful poultry raiser. By doing all that was stated 
above I was able to win first prize in the poultry contest just closed. 

Yours truly, 

Clarence A. Hogan. 

31. In the exercise which follows, the care of the chickens is the labor; 
the feed, spraying material, etc., are the materials ; the twenty-three dollars 
Clarence starts with represents the capital ; cleverness, good judgment, and 
activity in starting the business represent the enterprise. 

32. In finding the cost of labor, it was found that it required approximately 
half an hour each day to conduct the business. The value of his time was placed 
at twenty cents an hour. 

33. Note one thing in particular. He has correct ideas about business. 
He does not expect anything for nothing. At the outset he borrowed $20 
from his father at 6 per cent interest. This he paid promptly when due. 

Written Exercise 

Let us now examine his records. Illustration 5, page 22, is a reproduction 
of his egg record and illustration 6, page 23, of his food record. Illustration 7 is 



POULTRY ACCOUNTS 25 

a good form of cash book and one you are already familiar with from lessons 2 
and 3. He kept a separate set of books with his business ; his personal ac- 
counts he kept in a different book like the one used in lesson 2. 

By checking the Egg and Food records with the cash book for January, you 
will readily understand their uses. 

Directions. On two pages (not opposite) of practice paper rule the form 
shown in illustration 7. In this case allow | inch for the cents and the same for 
the dollars in the payment column. The "items" column will occupy the rest 
of the space. No ruling need be done if ruled sheets are provided. 

You may now write up the accounts on the form you have prepared from the 
following : 

Transactions 

Oct. 30 — Balance on hand, $ 3. 

30 — Borrowed of father on my note at 6 per cent, S 20. • 

31 — 22 hens at 75 ^ ; 1 rooster, .$2. 
Nov. 30 — 64 eggs for the month at 50 ^ doz. 

30 — Bought 149 lb. wheat, $ 2 ; 8 lb. corn at 16 ?; ; 4 lb. grit, 8 ^. 
Dec. 31 — 199 eggs for the month at 55 ^ doz. 

31 — 110 1b. wheat, $1.47; 28 lb. corn, 56 j^; 5 lb. grit, 10^; 19 lb. 

bran, 25^; 25 lb. shorts, 44^; hoe, 75 )Z^; spade, $1; bucket, 
1 1 ; lice killer, 25 ^. 
Jan, 31 — 378 eggs tor the month, at 50^ doz. 

31 — 93 lb. wheat, S 1.24 ; 21 lb. corn, 42 i ; 26 lb. bran, 35 ^ ; 4 lb. grit, 
8 ^ ; 26 lb. shorts, 46 ^. 
Feb. 28 — 319 eggs for the month, at 45 ^ doz. 

28 — 97 lb. wheat, $ 1.29 ; 25 lb. corn, 50 ^ ; 24 lb. bran, 32 ^ ; 4 lb. grit, 
8 ^ ; 24 lb. shorts, 42 ^. 
Mar. 31 — 410 eggs for the month, at 30 ^ doz. 

31 — 98 lb. wheat, $ 1.47 ; 31 lb. corn, 62 ^ ; 27 lb. bran, 36 ^ ; 4 lb. grit, 
8 ^ ; 27 lb. shorts, 47 f^. 
Apr. 30 — 358 eggs for the month, at 25 (^ doz. 

30 — 73 lb. wheat, $1.10; 23 lb. corn, 46 ^ ; 25 lb. bran, 35 ^ ; 4 lb. grit, 

8^; 25 1b. shorts, 44^. 
30 — Paid father's note, $ 20 ; interest, 60 (^. 
May 31 — 321 eggs for the month, at 25 ^ doz. 



26 PPINCIPLES OF BOOKKEEPING 

May 31 — 81 lb. wheat, $ 1.22 ; 17 lb. corn, 34 ^ ; 26 lb. bran, 35f^ ; 4 lb. grit ; 

8 ^ ; 26 lb. shorts, 46 i. 
June 30 — ■ 308 eggs for the month, at 30 ^ doz. 

30 — 80 lb. wheat, $ 1.20; 7 lb. corn, 14^; 25 lb. bran, 35^; 4 lb. grit, 

8 ^ ; 25 lb. shorts, 44 i. 
July 31 — 290 eggs for the month, at 30 f^ doz. 

31 — 104 lb. wheat, 11.56; 26 lb. bran, 35^; 4 1b. grit, 8^!^; 26 lb. 

shorts, 46^. 
Aug. 31 — 243 eggs for the month, at 35 ^ doz. 

31—95 lb. wheat, $1.66; 36 lb. bran, 48^; 4 lb. grit, 8^; 36 lb. 
shorts, 63 ^. . 
Sept. 30 — 144 eggs for the month, at 40 ^ doz. 

30 — 60 lb. wheat, $1.05; 34 lb. bran, 40?^; 4 lb. grit, 8^; 34 lb. 
shorts, 59^. 
Oct. 31 — 71 eggs for the month, at 45^ doz. 

31—54 lb. wheat, 96 1?^; 35 lb. bran, 42 f^; 4 lb. grit, 8^; 35 lb. shorts, 
61 ^ ; rent for the chicken house, 60 ^. 
Dec. 1 — Prize, $ 100. .; 

Your results should agree with the statement in the next lesson. 

LESSON 7 
THE FINANCIAL STATEMENT 

Definitions ■ 

34. A resource is anything we own, such as cash, land, horses, books, etc., 
and what others owe us. It represents something of value to us. A liability 
is a debt which uw owe others. 

35. When a business transaction costs more than we realize from it, we 
sustain a loss. When we get more out of a business venture than it costs us, we 
make a gain. 

36. A resource inventory is property on hand or an amount owing to the busi- 
ness not shown in the records. A liability inventory is an amount owing by the 
business to others not shown in the records. 

37. Depreciation is the reduction in value which property suffers by use. 

38. The net present worth of a business at any time is the difference between 
the resources and the liabilities. 



THE FINANCIAL STATEMENT 



27 






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39. By gross cost is meant total cost. By net cost is meant the total cost less 
any discounts or other deductions. In making articles the cost of each article 
is found by dividing the actual cost of all the articles by the number produced. 

40. A financial statement is a summary of the resources, liabilities, losses, 
and gains of a business at a given date and for a given period. In it is some- 
times included various other information such as a statement of cash receipts and 
payments, detailed inventories, and the like. 

Written Exercise 



On a sheet of paper ruled like illustration 8, prepare the statement given on 
the next page by filling in the blanks from the cash book in the last lesson. 



28 PRINCIPLES OF BOOKKEEPING 

Financial Statement of Clarence A. Hogan 

October 31, 1912 
Inventory, Nov, 1, 1911. 

1 rooster 
22 hens 
Cash 

Total 
Due father 
Net worth 
Inventory, Oct. 31, 1912. 
1 rooster 
22 hens 

Implements (less 10 per cent depreciation) 
Cash 

Total 

Statement of Loss and Gain 

Net worth now 
Net worth last year 

Total gain 

Prize 

Gross gain on chickens 

Less labor for 365 days, 10^ a day 

Net gain for enterprise 
Total number eggs sold, 3205, or 267 yV ^oz. 
Total cost : 

Cash 

Labor 
Total 
' Net cost per dozen is " total cost " ^ " total no. doz." 



REVIEW QUESTIONS 29 

LESSON 8 
REVIEW QUESTIONS 

On^LeSSONS 6 AND 7 

26. To what kind of transactions are private accounts limited ? 

27. What special kind of records are important in a productive business ? 

28. Define cost accounting. 

29. What elements enter into the cost of an article ? 

31. In a poultry business, what corresponds to these elements ? 

32. Do you regard the pay allowed Clarence as satisfactory ? How much 
would this be a month ? 

33. What important lessons did you learn in paragraph 33 ? 

33. What special lesson can you learn from Clarence's financial methods ? 

34. Define a resource ; a liability. 

35. Define a loss ; a gain. 

36. What is a resource inventory ? A liability inventory ? 

37. Define depreciation. 

38. Define the net worth of a business. 

39. Explain how to find the cost of an article. 

40. Define a financial statement and tell what it contains. 



30 



PRINCIPLES OF BOOKKEEPING 



LESSON 9 
DEBITS AND CREDITS 

41. In any business, things are bought to be sold. All such things are grouped 
in one place and are called merchandise. 

42. Merchandise may be paid for at the time it is received, or a promise of 
future payment may be given if both buyer and seller agree to this method of 
settlement. Money and all kinds of written promises or orders which may be 
promptly exchanged for money at their full or face value, are called cash in book- 
keeping. A post-office money order, an express money order, and a check are 
some of the more common forms of cash. 

43. When merchandise is bought on a promise of future payment, it is said 
to be purchased on credit. When the promise of future payment is oral, the 
transaction is on account. 



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Illustration 9 



Written Exercise A 

Directions. Draw a line vertically through the middle of an ordinary sheet 
of horizontally ruled paper. In beginning business you would find it necessary 
to buy merchandise before you could sell any. In writing your records you would 
naturally begin on the left-hand side of the sheet. Therefore, you would naturally 
write the record of your purchases on the left side of the dividing line, and later, 
when you sell this merchandise, you would complete the lines, writing on the 
right side of the vertical line. The name debit has been given to the records on 
the left side and the name credit to those on the right side. 



DEBITS AND CREDITS 



31 



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Illustration 9b 

Enter the following transactions on the sheet you have prepared as shown in 
illustration 9, page 30, observing the directions regarding left and right sides of 
your page. 

1. Bought 500 bu. wheat at $ 1 and paid cash. 

2. Sold 100 bu. wheat at $ 1.20 and received cash. 

3. Bought 50 bu. beans at $ 3 and paid cash. 

4. Sold 30 bu. beans at $ 3.50 and received cash. 

5. Bought 200 bu. millet at $ 1 and paid cash. 

6. Sold 100 bu. millet at % 1.30 and received cash. 

7. Sold 200 bu. wheat at $ 1.25 and received cash. 

8. Bought 60 bu. beans at $ 3 and paid cash. 

9. Sold 40 bu. beans at $ 3.50 and received cash. 
10. Bought for cash 200 bu. oats at 65^. 

44. From this exercise it will be seen that all things that come into the busi- 
ness are debited and all things that go out of the business are credited. This is the 
only rule that need be remembered in connection with this class of transactions. 

45. An account is a collection of like debits and credits arranged under an 
appropriate name. For example : cash account as it was written up in the pre- 



32 PRINCIPLES OF BOOKKEEPING 

ceding lessons. All cash received was placed on the left side and all cash paid out 
was entered in the proper columns at the right. 

Written Exercise B 
Enter the above transactions again as shown in illustration 9b, page 31, 
which is the usual form of indicating debits and credits. 

The Principles of Double Entry 

46. There are two general methods of keeping accounts. Single entry, by 
which are kept accounts with persons only. Double entry, by which are kept 
accounts, not only with persons, but with property and allowances. 

47. Double entry is greatly superior to single entry ; first, because it enables 
us to detect many errors in our work which could not be found readily by single 
entry; and, second, it enables us completely to analyze our profits and losses 
with reference to their sources. 

48. You have unconsciously used double entry in the exercises you have 
already written up. You will remember that every payment in the private 
cash accounts was entered in both the "total" and the distribution columns. 
There never was any exception to this. Cash was credited for the payment 
and one or more of the distribution columns was debited. You will remember 
that we could balance our cash on every page or at the end of every month. 
The footing of the "total" column equaled the sum of the footings of the 
distribution columns. The same was true of the cash receipts. This was truly 
double entry though restricted to cash and impersonal transactions. In order 
to master the art of double entry, we must now study its principles and, in several 
exercises, learn how to apply them. 

49. In the double-entry system of bookkeeping there is a debit for every 
credit and vice versa. This is on the theory that every transaction involves an 
exchange which must eventually result in an income and a corresponding outlay, 
or several incomes and several outlays. 

50. The recount is the basis of all bookkeeping and to it all entries are 
destined. Tiie only book that is absolutely essential to double entry is one 
arranged for classified accounts. Others are used, however, for convenience. 
We have seen that the forms in lessons 2 and 4 answer this purpose to a limited 
degree by using the columns as accounts. 

51. The ledger is the book of accounts, while other books are books of 
original entry. The usual form is shown in illustration 11, page 41. 



DEBITS AND CREDITS 



33 



52. The left side of the ledger is called the debit, and the right, the credit 
side. 

53. (A) When a person takes something from the business without giving 
some material thing in return his account is debited or charged. When the busi- 
ness receives something from a person without giving any material thing in 
exchange, the person's account is credited. 

(B) When something comes into the business an appropriate impersonal 
account is debited. When something goes out of the business an appropriate 
impersonal account is credited. For example, when money or its equivalent 
is received, cash acsount is debited. When money or its equivalent is parted 
with, cash account is credited. 

Illustrative Examples • 

On January 1, 191-, Clarence Hogan, being a thrifty young man, is alert for 
a chance to make a profit with his savings. We have seen that he is also method- 
ical and accurate in his business. We find the following memoranda in his 
notebook. 

Transactions 



"Jan. 1. I have on hand $125 and I have decided to buy a horse for 
$ 100, because my father thinks he will soon be worth much more. 

"Jan. 4. Bought a bay four-year-old colt, Jim, of Robert Williams for 
% 100 cash. 

" Jan. 5. Bought feed for % 5 cash. 

"Jan. 20. Sold Jim for $ 150." 

He wishes to find out the result of his venture and to put the story of his 
transactions in a little more systematic form. He opens a cash account as 
follows : 

Cash 

DEBIT (received) (PAID) CREDIT 



Jan. 



1 
20 



On hand 
For Jim 





125 




Jan. 


4 




150 






5 


275 











For Jim 

For feed 

Balance 





100 

5 

170 

275 







34 



PRINCIPLES OF BOOKKEEPING 



This cash account is not satisfactory to Clarence. What he wants to know, 
besides his cash record, is how much he made on the horse deal, and how. He, 
therefore, decided to analyze his whole venture. In this he is assisted by his 
teacher. His instructor explains each transaction, step by step, as follows : 

Jan. 1. "There are two accounts involved in this transaction: cash and 
yourself. So one is opened with the title 'Cash' and another, 'Proprietor,' 
as follows : 

PROPRIEfOR 
DEBIT CREDIT 







^ 






Jan. 


1 


Investment 




125 






Cash 








DEBIT 


(received} 




(paid) 


credit 



Jan. 



1 
20 



On hand 
For Jim 





125 
150 




Jan. 


4 
5 



Paid for Jim 
Paid for feed 



100 
5 



" (1) Note that we record things or promises that come to the business on the 
left, or debit, side. 

" (2) We record things or promises that go from the business on the right, 
or credit, side. 

"This is merely a convenient custom growing out of the method of recording 
business transactions illustrated in lesson 9. In this transaction cash is a thing 
coming into the business and is, therefore, debited. The business is obligated 
or expected to repay the Proprietor (yourself) the investment you put into it, 
and, therefore, the Proprietor's account is credited." 

" Remember that in double-entry bookkeeping the business is an imper- 
sonal idea entirely apart from the owners." 

We now come to the second transaction. 

Jan. If- " Here, again, we have two accounts: the horse which comes into 
the business is, therefore, debited (1) ; and the cash which goes out is, there- 
fore, credited (2) . We therefore open another account. 



Horse 



debit 



(cost) 



(returns) credit 



Jan. 



Cost 
Feed 





100 
5 




Jan. 


20 



Sold for 



150 



DEBITS AND CREDITS 35 

Jan. 5. "Here, also, we have two accounts : 'Feed' comes into the business 
and is, therefore, debited (1) (but since it is consumed by the horse, we debit the 
horse with it) ; and cash goes out and is, therefore, credited (2). 

Jan. 20. "Here once more we have two accounts : Cash coming in is debited 
(1) ; Horse going out is credited (2). This completes the records. By turning to 
the Horse account we find that the returns, or credit, side is $45 larger than the 
cost, or debit, side. The net result of the transaction is, therefore, a gain of $ 45." 

Summary of Principles 

54. We have now reached a point where we can summarize the rules for 
determining the debits and credits in business transactions. 
The Proprietor 

(1) Debit the proprietor for all withdrawals for personal use and for the net 
loss of the business. 

(2) Credit the proprietor for his investments and for the net gain. 
Property 

(3) Debit property that comes into the business. 

(4) Credit property that goes out of the business. 
Persons 

(5) Debit persons when they receive something from our business without 
giving us some material thing, such as a note or money, in return. 

(6) Credit persons when they give us something without receiving some 
material thing in return. 

Alloioances 

(7) Debit allowances made by the business to others. 

(8) Credit allowances made to the business by others. 

The Law of Debit and Credit 

^ 55. Rules 1 to 8 may be stated as a general law as follows : 
Debit that for which we exchange something. 
Credit that for which we get something in exchange. 



36 PRINCIPLES OF BOOKKEEPING 

LESSON 10 
MODEL SET 

56. The object of this set is to illustrate the principles of debits and credits, 
as stated in paragraphs 41 to 55, and other bookkeeping processes such as post- 
ing, taking trial balance, making balance sheet, and closing the ledger. The 
simplest figures have been used, the object being to illustrate bookkeeping and 
not commercial arithmetic. 

57. Remember that while in itself the form may often be ot little value, it is 
of the greatest importance in the early stages of your study. The form used 
in the model has been- approved by the best accountants for centuries. The 
student should, therefore, give it the closest attention. 

58. In recording a business transaction, it is of the utmost importance that 
all the essential facts of the transaction be recorded and that the statement be 
sufficiently detailed so as to admit of no misunderstanding of its meaning. 

59. In actual business, where transactions are numerous, it is customary to 
classify them in four books of original entries, the cash book, sales book, pur- 
chase book, and journal, as illustrated in lesson 55, but the principles of debit 
and credit are most readily understood by using only the journal-daybook, and 
therefore only this book will be used in this set. It is conveniently ruled for 
indicating the debits and credits that are necessary in recording business 
transactions. Proper space is allowed for amounts and explanations. 

Written Exercises 

(A) You will now copy the model journal, illustration 10, pages 38, 
39, and 40. Four pages of journal paper will be required. Note that the totals 
of the money columns are equal at all times. Number the pages from 1 to 4. 
On a separate sheet write the reason for every entry, as shown under Feb. 1. 
Credit will not be given for this lesson unless this is done. Having copied the 
journal hand it to your teacher for approval. 

(B) Using the form illustrated in the model journal, make the proper journal 
entries for the ten transactions in lesson 9, page 31. 

(C) You will now copy the model ledger, illustration 11, pages 41, 42, and 
43. You will use lour pages of paper. Number the pages. Give one third 
of the page to each account. Write the titles in a clear, large hand ; then 



MODEL SET 37 

number each account, as shown in the model. You will do ail the ruling in 
red ink. Observe that the single line extends only through the money column, 
while the double line extends through all except the items columns. Rule di- 
rectly on the blue line and note in accounts 2 and 3 that the ruling is done on 
the same blue line on both sides of the account, even if the number of entries 
are unequal. 

(D) You will now copy the trial balance and statements. You will need 
two pages of journal paper, arranged the same as the model, illustration 12, 
pages 44 and 45. Only one form of trial balance should be used. By taking 
all the totals, as shown in the first two columns, their sum will equal those in 
the journal. If only one side agrees with the ledger, it is known that the 
other is wrong and must be checked to find error. It is best, therefore, to use 
totals instead of balances. 

(E) Having copied the entire model, you will now trace every entry from the 
journal to the ledger, from the ledger to the trial balance, and from the trial 
balance to the statement. Feb. 1, 2, and 4 are traced by connecting lines in the 
first three accounts. You have now noticed that every entry in the journal 
is found under the corresponding account in the ledger, that the sum of the 
journal entries equals the sum of the ledger entries and that the two sides 
are equal. Hence the term " double entry." 



38 



PRINCIPLES OF BOOKKEEPING 



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LESSON U 
REVIEW QUESTIONS 

On Lessons 9 and 10 

4L What is meant by the term "merchandise" ? 

42. What is meant by the term "cash" ? 

43. What is meant by buying "on credit" ? "On account" ? 

45. What is meant by an account ? 

46. What are the two general methods of keeping accounts ? Define each. 

47. Why is double entry superior to single entry ? 

48. Discuss why lessons 1, 2, and 3 deal with double entry. 

49. State the theory of double entry. 

50. What is the basis of all bookkeeping ? 

51. Define a ledger. 

52. What is the meaning of the words "debit" and "credit" ? 

53. What does it mean to debit an impersonal account ? 

54. State the rule for debiting and crediting the proprietor. 
54. State the rule for debiting and crediting property. 

54. State the rule for debiting and crediting persons. 

54. State the rule for debiting and crediting allowances. 

55. Give the general law of debits and credits. 

57. Why is it important to observe the correct form of entries ? 

58. Discuss the importance of complete entries. 

59. What record book was used in this set ? 



46 PRINCIPLES OF BOOKKEEPING 



LESSON 12 

STOCK SET — JOURNALIZING 

60. The object of this set is to famiharize the student with the principles 
laid down in the last two lessons, and also to introduce accounts with persons and 
expense. The same blanks will be used as in the model set. 

61. Journalizing is deciding upon and arranging debits and credits in a 
convenient form for posting. 

62. An entry is a record of particulars and items, in the journal or some other 
book of original entry. This should not be confused with the account. See 
paragraph 45. 

63. A simple journal entry is one in which there is only one debit and one 
credit, as 

Cash $50 

Mdse. % 50 

64. A compound journal entry is one in which there is one debit and more 
than one credit ; or one credit and more than one debit ; or several debits and 
several credits, as 

Mdse. 1 50 

Cash % 25 

Jones & Co. % 25 

or, 

Cash $100 

Henry Brown $ 105 

Mdse. $205 

or, 

Mdse. $200 

Expense $ 100 

Cash $120 

Bills Payable $ 180 

65. Errors in amounts which have not been included in totals, or which, if 
corrected, would not change other figures should be corrected by drawing a red 
line through the incorrect amount and substituting the correct amount. When- 



JOURNALIZING 47 

ever the correction would involve other changes, it should be made by means 
of a journal entry. Thus if Merchandise is charged for stationery which was 
used in the office, the proper entry would be Stationery to Mdse., crediting 
Mdse., for what was incorrectly debited to it. A full explanation should accom- 
pany each correction. Never erase. 

Written Exercise 

You will now journalize the following transactions in exactly the same 
manner as in the model set. Two pages of journal paper will be required. 
Remember that the debits are written at the left side (next to the red line) and 
the credits at the right (next to the blue line). Place the first date (month, 
day, and year) at the top ot the page, and the other dates (day only) in the 
center of the explanation column and skip a line between each entry. Study 
the principles involved in every entry. The total of each column is $948. 
When completed, hand in your work for approval. 

February 1, 19 — . Clarence Hogan has decided to invest his entire capital, 
$ 170, in two horses and two cows and begin the stock business. He is advised 
to continue the same method of bookkeeping as was used in the last two lessons 
except that, owing to the greater number of transactions, he is advised to de- 
cide upon the debits and credits before posting. He writes the titles to be 
debited and credited, and the respective amounts, immediately below the 
memorandum. This art of deciding upon the debits and credits is called 
journalizing. 

Debit Cash and credit Proprietor. See paragraph 54, principals 3 and 2. 
Use exactly the same form of journal as in illustration 10, page 38. 

3. Bought of Edwin Brown a two-year-old colt, "Ned, " for cash, $ 75. 

5. Bought of W. E. Morrison a four-year-old horse "Prince" for % 125, pay- 
able in 15 days. 

8. Bought a three-year-old cow of Isaac Thompson for $ 40 cash. 

9. Bought a four-year-old cow of E. B. Smith, paj'able in 20 days, $50. 

12. Bought hay and feed for $ 15 cash. {Anticipating that we may have ex- 
penses which cannot be charged directly either to the Horses or the Cows, loe open 
an account ivith Expense.) 

14. Bought a halter for cash, $2. Debit Expense and credit Cash. Why ? 

15. Paid for stable hire, $ 100. jNIake the proper journal entry. 
17. Sold both horses to Empire Livery Co. for cash, $250. 



48 PRINCIPLES OF BOOKKEEPING 

18. Sold both cows to E. L. Ford on account, payable in 30 days, for $ 110. 
20. Paid W. E. Morrison for the horse bought Feb. 5 in cash, $ 125. 

LESSON 13 
STOCK SET — POSTING 

66. Posting is transferring the debits and credits from books of original 
entry into the ledger, and properly classifying them. 

67. Indicating the pages to which or from which posting is done, is very im- 
portant, since it is often necessary to refer from one book to another. It is 
especially important in checking, as it saves the time wasted in hunting pages 
through an index. It also indicates at a glance whether or not the posting 
has been done. Note that there is to be a page or account number opposite 
every debit and credit in the journal, indicating where the amount is found in the 
ledger ; and in the ledger folio column there is to be a journal page number oppo- 
site every amount, indicating from what page of the journal the amount was 
taken. 

68. The ledger accounts frequently become wevy numerous and it is, there- 
fore, important that the accounts be properly indexed. References are made 
either to the page or account number. Study the manner of indexing names in 
your telephone directory. 

Written Exercise 

You will now post the journal entries into the ledger. Three pages of ledge r 
paper will be required. (1) Number the pages as usual. (2) At the top of 
page 1, on the blue line, write Clarence Hogan; 8 lines below, write Cash; and 
12 lines below, Horses. Give one third page to each of the following accounts : 
Page 2, Coios, Expense, W. E. Morrison; page 3, E. B. Smith, E. L. Ford 
and Loss and Gain. (3) Post all the debits. Under Cash, on the left side, 
write 

19— 

Feb.l 1 170 

and mark the ledger page 1 opposite cash in the journal. Next under Horses 
write 

19— 

Feb.l 1 75 



POSTING 49 

and also mark the ledger page. Proceed in the same manner until all the debits 
are posted. Now add the amounts in the ledger and see if the total is $963, 
the same as in the journal. 

(4) Proceed to post the credits in the same manner and test the totals. You 
have 22 amounts in the journal ; you should have 22 ledger page numbers in the 
margin. 



50 PRINCIPLES OF BOOKKEEPING 

LESSON 14 
TRIAL BALANCE AND BALANCE SHEET 

A. The Trial Balance. 

69. The trial balance is a list of all open accounts with the total of the debits 
and credits of each placed opposite the name of each account ; or the balance of 
each account may be found and placed in the left or right money column accord- 
ing as it is a debit or credit balance. In either case the two sides must be equal. 

70. The trial balance proves only that the two sides of the ledger are equal. 
It does not show errors in posting that do not affect the equality of the debits and 
credits. For example, if we charged Jones and credited Stock with $ 100, when 
it should have been $ 125, or if we charged Brown instead of Smith, the trial 
balance would not show the error. 

71. If the two sides of a trial balance are not equal, it is generally a waste of 
time to try short cuts to find the error. The best way is usually to check the 
work in the following order : (1) The totals of the trial balance ; (2) the transfers 
from the ledger to the trial balance ; (3) the totals in the ledger ; and (4) the post- 
ing from the books of original entry into the ledger. Care should be taken 
actually to place a check mark (y/) opposite each correct entry so as to avoid 
repetition or omission. Many bookkeepers check before taking a trial balance. 

72. The proprietor's account shows, on the debit side, the withdrawals from 
the business, and losses, if any ; on the credit side, the original investment, sub- 
sequent investments, and the net gain, if any. After the account is ruled, it 
shows, on the credit side, the present worth. 

73. The debit side of the cash account is nearly always the larger. 

74. Accounts with property usually show a balance, if any, on the debit side. 

75. Expense account represents purchases of things, service, etc., necessary 
to carry on the business and therefore will be debited for such expenditures. 
Occasionally expense items are sold, or for some reason an expense outlay is re- 
turned in whole or in part. In such cases the expense account is credited for 
the amounts expended. 

76. Accounts with persons show a balance on the debit side, if they owe the 
business ; on the credit side, if the business owes them. 



TRIAL BALANCE AND BALANCE SHEET 61 

Written Exercise A 

(A) Total all the ledger columns having two or more entries, leaving light 
pencil totals, as shown in the model. Find the balance of each account. This 
may be done in pencil on the larger side of the account, as shown in the model. 
Do not erase the pencil figures, as they may be of assistance in detecting errors. 

(B) On a sheet of scratch paper make a trial balance of your ledger. 

W. E. Morrison's account is not included because both sides are equal. 
Follow as your model illustration 11, page 41. The total of both sides should 
be $290. 

(C) Having completed the rough balance, copy it on a page of journal paper. 
B. The Balance Sheet. 

77. The balance sheet is a condensed statement of the condition of a business 
at a given date and the results of operations for a given period. It should 
exhibit (1) A statement of the resources and liabilities ; (2) an analysis of the 
losses and the gains ; and, finally, (3) the present worth of the business. 

78. The net worth of a business is the difference between the total resources 
and the total liabilities. 

79. There are two ways of finding the present worth of a business : (1) by 
taking the difference between the resources and the liabilities ; (2) by adding the 
net gain to the proprietor's net credit. If the two results are equal, the balance 
sheet is generally considered correct. 

80. An account shows a resource if it represents property on hand or an 
amount due the business ; a liability if it represents an amount owing by the 
business. 

81 . An account shows a loss if it has cost us more than it has produced ; 
a gain if it has produced more than it has cost. 

82. The cash account ordinarily shows a resource. It would show a liability 
only when an overdraft at the bank exceeds the money on hantl. 

83. In making a trial balance the cash book, if used, will be considered the 
cash account and the balance will be obtained from this source instead of from the 
ledger. 

84. An account with a person shows a resource when the debit side is larger 
than the credit side ; a liability when the credit side is the larger. 



52 PRINCIPLES OF BOOKKEEPING 

Written Exercise B 

(A) On a sheet of scratch paper write the heading Resources and Liahilities^ 
Feb. 28, 19 — ; and on another Losses and Gains, Feb. 29, 19 — . 

{B) Take the trial balance and begin with the Cash account (Hogan's ac- 
count, being the proprietor's, will be considered last). Since the balance % 162 
represents property on hand, it is a resource (34), hence you write it under the 
Resource and Liability heading. Next take the Horses account. Since you 
have no property left under the account and the credit side is the larger, it shows 
that the account represents a gain (35), hence you write it under the Loss and 
Gain heading. Thus you find that the Horses, Cows, and Expense accounts 
fall under Loss and Gain. Smith's and Ford's accounts fall under Resources 
and Liabilities. The net gain is $ 52. The present worth is Hogan's credit, 
$170 plus $52, or $222; and this, added to the credit side of the Resources 
and Liabilities account, makes the two sides equal, which proves the work. 
Reference figures of ledger pages or account numbers should be given in the 
statement opposite every account. See illustration 12, page 44. When you 
have checked }'our work and found it correct, you will copy it in ink on a 
page of journal paper. 

LESSON 15 
CLOSING THE LEDGER 

85. The object of closing the ledger is to balance the loss and gain accounts 
and to bring the final net gain or net loss into the proprietor's account and thus 
clear the way for the entries for the next fiscal period. 

86. By closing an account is meant cancelling equal amounts on both sides 
and bringing down the balance, either below the ruling on the larger side of the 
same account or into a summary account, such as Loss and Gain. See the 
model. 

87. Before closing the ledger, the following steps must always be completed, 
as shown in lessons 13 and 14. 

1. The ledger must be completely posted and checked. 

2. The trial balance must be taken off. 

3. The balance sheet must be made. 

These steps must be taken in the order indicated. 



CLOSING THE LEDGER 53 

88. All the loss and gain accounts represented in the statement must be 
closed ; the resource and liability accounts may be closed. The balance sheet 
serves as a guide in closing the ledger. 

89. The significance of double ruling in the money column of a ledger account 
is that the amounts above the ruling on both sides of the account are equal, and 
that the account above the ruling is closed. 

90. The significance of red-ink entries is that they are temporary and in- 
serted only for the purpose of balancing. Unless the ledger is permanently 
closed, the red-ink entry will always be found either below the ruling or in some 
other account on the opposite side in black ink. 

91. The proprietor's account is closed by crediting it with the net gain or 
debiting it with the net loss and bringing down the balance in one amount, 
under the credit side, as the present worth. 

92. An account with a person having several items on both sides should be 
balanced, as shown in the model. No such account occurs in this set. 

93. An account with a person having one item only should iTot be closed at 
all. Example, E. B. Smith in this lesson. 

94. An account with a person having only one debit and one equal credit is 
closed by double red lines, as in. the case of W. E. Morrison, this lesson. 

95. If the business is owned by an individual, there is, of course, no adjust- 
ment of profits and losses necessary. There is simply the relation between the 
business in the abstract and the proprietor. The net profits of the business are 
credited to the proprietor, or the net loss is debited to him. This is fully illus- 
trated in the model. 

96. After closing the ledger, it is of the utmost importance that the balances 
below the rulings be checked with the statement of resources and liabilities. 
All the balances which appear under resources, and no more, must be under the 
ruling on the debit side ; and all the balances which appear under liabilities- 
including the present worth, and no more, must be on the credit side. The 
sum of the two sides must be equal. 

Written Exercise 

{A) With the balance sheet and ledger before you, turn to the cash account. 
On the smaller, or credit, side write in red ink on the next line under the last 
entry, Feb. 28, Balance 162. Then rule the account exactly as shown in the 
model. Finally bring down the balance under the ruling on the debit side, 
writing in black ink, March 1, Balance, 162, Observe that this is merely 



54 PRINCIPLES OF BOOKKEEPING 

canceling 263 from both sides of the account, thus simplifying it for the next 
period and making it more convenient for reference. 

Next turn to the Horses account. On the smaller, or debit, side write 
in red ink, Feb. 28, Loss & Gain, SO. The Cows account and the Ex- 
pense account are closed in the same manner, except that Expense shows a 
loss. 

(B) Now bring the gain from Horses and Cows into the credit side of the 
Loss and Gain and the loss from Expense into the debit side of Loss and Gain. 
Balance the latter account by writing in red ink on the smaller, or credit, side 
Feb. 28, Net Gain, 52. Credit the Proprietor with the net gain. Write in 
black ink, as shown in the model. 

(C) Rule Morrison's account, as directed in paragraph 94. 

(D) Finally check all the balances below the ruling and the closed accounts, 
as directed in paragraph 96. 

LESSON 16 

REVIEW QUESTIONS 

On Lessons 12, 13, 14, and 15 

61. Define journalizing. 

62. Define an entry. 

63. Define and illustrate simple journal entry. 

64. Compound journal entry. 

65. How should errors be corrected ? 

66. Define posting. 

67. Explain the method and importance of indicating pages from and to 
which entries are posted. 

68. Why is it important to index the accounts properly ? 

69. What does the trial balance show i 

70. What does it prove ? 

71. Ho.w should errors indicated in the trial balance be found ? 

72. What does the balance of the proprietor's account show ? 

73. On what side of the account must the cash balance occur ? 

74. What does the balance of a property account show ? 

75. Expense account ? 

76. Accounts with persons ? 

77. What is a balance sheet and what does it show ? 



REVIEW QUESTIONS 55 

78. Define the net worth of a business. 

79. In what two ways is the present worth found ? 

80. When does an account show a resource ? 

81. A loss? 

82. What does the cash account show ? When may it show a HabiHty ? 

84. When does an account with a person show a resource ? A HabiHty ? 

85. What is the object of closing the ledger ? 

86. What is the meaning of closing an account ? 

87. What steps are necessary before the ledger can be closed ? 

88. What accounts must be closed ? Which may be closed ? 

89. What is the significance of double ruling ? 

" 90. What is the significance of red-ink entries ? 

92-94. When and how should an account with persons be balanced ? 

95. Does the net gain or net loss of the business affect the proprietor's 
account ? ■ 

96. Why must the balances below the ruling be checked with the statement 
of resources and liabilities after the ledger is closed ? 



56 PRINCIPLES OF BOOKKEEPING 

LESSON 17 

PRODUCE SET 

This set is introduced for additional practice. The new feature in book- 
keeping principles is the introduction of the produce and expense inventory. 

A. Journalizing. 

This is done in exactly the same form as in lesson 12. The only difference 
is in the titles of accounts. Four pages of journal paper will be required. 

B. Posting. 

You will need four pages of ledger paper. Number the pages. Place three 
accounts on each page, the last being Loss & Gain. Proceed exactly the same 
as in lesson 14. Do not forget the page numbers when posting. 

March 1, 19 — . Student engages in the produce business, investing $100. 
3 — Bought for cash, 100 potato sacks at 05^. 
3 — Bought for cash, 70 cwt. potatoes at $ 1 cwt. 
5 — Sold to H. F. Bowman on account, 20 cwt. potatoes at $ 1.20. 

5 — Paid for hauling potatoes, S 1. 

6 — Sold to J. T. Smith on account, 5 cwt. potatoes at $ 1.20. 

6 — Bought of C. C. Galloway on account, 80 cwt. potatoes at $ 1. 

7 — Sold to Arthur Brown on account, 10 cwt. potatoes at S 1.20. 
9 — Bought for cash, 10 cwt. potatoes at $ 1. 

12 — Bought of W. S. Bridges on account, 15 cwt. potatoes at $ 1. 
14 — Sold for cash, 5 cwt. potatoes at $ 1.20. 

17 — Sold for cash, 15 cwt. potatoes at % 1.20. 

18 — Arthur Brown paid $ 12 in full of account. 

21 — Bought of Joe Smith on account, 10 cwt. potatoes at $ 1. 
26 — Sold to Hotel Julian, 100 cwt. potatoes at $ 1.10. 
28 — Paid C. C. Galloway $ 80 in full of account. 
Inventory: 50 potato sacks at 05^ ; 16 cwt. potatoes at $ 1. 

LESSON 18 

PRODUCE SET — Continued 

C. The Trial Balance. 

Total the ledger accounts in pencil and proceed in the same manner as in 
lesson 14. Have your work checked by your teacher. 



PRODUCE SET 57 

D. The Financial Statement, or Balance Sheet. 

This is the same in form as in lesson 14, except that the inventory must be 
taken into account. Proceed as follows : On two slips of paper, headed, re" 
spectively, Resources and Liabilities, Losses and Gains, you will classify the 
accounts the same as in lesson 14. The Produce account shows a cost (debit) 
of $ 185 and a return (credit) of $ 176. You find that you have on hand 
$16 worth of potatoes. Add this to the credit and the result is $192; 
subtracting the cost will show the gain on produce $7. The $16 is placed 
under the Resources and the $7 under the Gains. Expense is debited with 
$6; but you find that $2.50 of this has not been used up, hence it should be 
deducted. The net loss under expense is, therefore, $3.50. The $2.50 is 
placed under the Resources and the $3.50 under Losses. Complete the state- 
ment, as shown in illustration 12, page 44. 

LESSON 19 
PRODUCE S^T — Continued 

E. Closing the Ledger. 

The ledger is closed in the same manner as in lesson 15, except that the 
produce and expense inventories are entered on the credit side of their respective 
accounts in red ink before those accounts are closed. 

LESSON 20 

From the following trial balance make a balance sheet : 
Robert Ward — Prop. $ 5720. 

Merchandise $ 338.80 

Expense 450. 

Cash 3509.21 

Henry Brown 926.39 

James Bristol 586.50 

Frank M. Howe 1205.25 

George W. Brown 686.15 

C.W.Wilson . 610. 

$ 7016.15 $7016.15 

Mdse. inventory $1536.10 

Expense inventory 350 



58 PRINCIPLES OF BOOKKEEPING 

LESSON 21 

From the following trial balance make a balance sheet : 
Student — Prop. $4750. 

Merchandise $ 877.89 

Cash 2513.97 

Expense 238.90 

Mason Produce Co. 287.50 

Jones Grain Co. 2986.25 

H. H. Grayson & Son 287.50 

Henry Holmes 982.29 

J. D. Anderson 1137.42 

M. F. Wilson & Bro. 322.30 

$ 7192.01 $ 7192.01 

Mdse. inventory $1250.25 

Expense inventory 160. 

Supplementary Exercise 

' From the following trial balance make a balance sheet : 

William F. Morris — Prop. ^ $4033.80 

Cash $1631.14 

Merchandise 1496.93 

Expense 156.11 

Henry Ford 81.60 

C. M. Stanley 66.50 

A. L. Denson 126.10 
L. J. Ferris 592.12 
Geo. H. Putman 1165. 

H. J. Miller 145.01 

John H. Moore 207.84 

Roy O. Cook 336.06 

B. W. VanWie 592.79 

$ 5315.50 $ 5315.50 

Mdse. inventory $2110. 

Expense inventory 80. 



PRODUCE SET 



59 



LESSON 22 

Copy the following accounts on a ledger sheet, allowing one fourth of a page 
to each account, and close the ledger : 

Student — Prop. 



DEBIT 


(received) 














(paid) 




CREDIT 


Jan. 


10 
30 


J. 
J. 


3 
6' 


loo; 

50 




Jan. 


1 


J. 


1 




3000 





INIerchandise 



DEBIT 




(received) 














(paid) 




credit 


Jan. 


1 


J. 




1 


286 


50 


Jan. 


1 


J. 


1 




297 


50 




3 


J. 




1 


437 


60 




15 


J. 


3 




386 


40 




30 


J. 




6 


542 


80 




30 


J. 


6 




225 





Expense 



debit 


(received) 












(paid) 




CREDIT 


Jan. 


1 
10 
31 


•■3 

J. 
J. 
J. 


1 

3 
6 


100 

50 

150 

















Loss & Gain 



DEBIT (rECIEVED) 



(paid) 



CREDIT 



Mdse. inventory $462. 

Expense inventory $150. 

Note, — Cash account has a balance of $2192 but is not included, as it 
does not need to be closed. 

After closing the ledger, take a trial balance, using the cash balance given 
in the above note. This is called a proof trial balance, as it shows that all 
balances, etc., have been brought down below the ruling. 



60 



PRINCIPLES OF BOOKKEEPING 



LESSON 23 
Copy the following accounts on a ledger sheet and close the ledger : 

Student — Prop. 

DEBIT (received) (pAId) CREDIT 



Jan. 



10 



6 



300 



Jan. 



1 J. 



1 



Merchandise 



.6000 



debit 


(received) 














(paid) 




credit 


Jan. 


1 


J. 


1 


942 


75 


Jan. 


2 


J. 


3 




430 


25 




2 


J. 


2 


685 


50 




3 


J. 


3 




520 


35 




3 


J. 


2 


1438 


25 




3 


J. 


4 




225 


70 




4 


J. 


2 
1 


1242 






4 


J. 


4 




1520 


10 



Expense 



debit 


(received) 












(paid) 




CREDIT 


Jan. 


1 
2 


J. 
J. 


1 

2 


120 
50 

















DEBIT (received) 



Loss & Gain 



(paid) 



CREDIT 



Mdse. inventory $2320. 

Expense inventory $70. 

Note. — Cash account shows a debit balance of $3917.90. 

Make a proof trial balance. 

Supplementary Exercise 
Copy the following accounts on a ledger sheet and close the ledger 

Student — Prop. 



debit 


(received) 














(paid) 


credit 


Jan. 


15 


J. 


16 


1200 




Jan. 


1 


J. 


1 


11000 





SIX-COLUMN BALANCE SHEET 
Merchandise 



61 



DEBIT 


(received) 














(paid) 




credit 


Jan. 


1 


J. 


1 


2890 


20 


Jan, 


2 


J. 


2 




1428 


10 




3 


J. 


2 


8420 


50 




3 
4 
5 


J. 
J. 
J. 


2 
3 

8 




564 
1356 
1426 


30 
10 
50 



Expense 



DEBIT 




(received) 












(paid) 




CREDIT 


Jan. 


1 
5 


J. 
J. 




1 

6 


250 
560 


10 















DEBIT (received) 



Loss & Gain 



(paid) 



CREDIT 



Mdse. inventory $9286. 

Expense inventory $560. 

Note. — Cash account shows a debit balance of $2454.20. 

Make a proof trial balance. 

LESSON 24 
SIX-COLUMN BALANCE SHEET 

In the preparation of a financial statement, it is sometimes best to arrange 
the items in a tabular form, illustration 13, page 62. It has the advantage of 
being easily checked and of showing in a condensed form the essential facts of 
the financial condition of a business; but it is inconvenient for publication. 
Hence some bookkeepers use this only as a working sheet, and then arrange it 
into the statement form, if it is to be published. 

Written Exercise 

A. Rule a sheet of practice paper exactly like illustration 13, if ruled paper 
is not provided. Then prepare a six-column balance sheet from data given in 
lesson 20. Note that the inventories are either written in red ink or within 
parenthesis. Hand in your work for approval. 



62 PRINCIPLES OF BOOKKEEPING 



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Illustration 13 



B. In the same manner prepare a similar balance sheet from data given in 
lesson 21. Hand in your work for approval. 

LESSON 25 
REVIEW QUESTIONS 

On Lessons 19 to 24 

Note. — Since the following questions are not answered in numbered 
paragraphs, the numbers at the left are not paragraph numbers. 2 lines long 



REVIEW QUESTIONS 63 

1. Lesson 19 — What was done with the produce and expense inventories 
before closing the ledger ? 

2. Lesson 20-21 — Explain your balance sheets, giving the reasons for each 
step. 

3. Lessons 22-23 — What is shown by the debit side of your own account ? 
The credit side ? 

4. What is shown by the debit side of the merchandise account ? The credit 
side ? 

5. What is shown by the debit side of the expense account ? The credit side ? 

6. What is meant by "merchandise inventory — $ 462" ? 

7. What is meant by "expense inventory — $150" ? 

8. Why is not the cash account included in these exercises ? 

9. When the ledger is closed what does the proprietor's account show ? The 
merchandise account ? The expense account ? 

10. What is meant by a "proof trial balance" ? 

11. Describe the six-column balance sheet. 

12. What advantage has this form of financial statement ? What disadvan- 
tage has it ? ^^- 



64 PRINCIPLES OF BOOKKEEPING 

LESSON 26 
BILLS RECEIVABLE AND BILLS PAYABLE 

97. A promissory note is a written unconditional promise to pay a certain 
sum of money to a certain person or his order at a specified time and place, 
properly signed by the party making the promise. 

98. The party making the promise is called the maker. The one to whose 
order the money is to be paid is the payee. 

99. Illustration : 



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Ua^<U^L^^^^4^.-^,--iZ^6..-L--Z/~(^^ ..-^,5/--^^2^;^C^-.-'^>^'2..'Z^^>^--^.<i-^ 


Jj:::U.^^J7l^u^^,/f/3, U<?-fL-f-t^ aJ^^b^?-£^ — 



Illustration 14 

In this note John Doe is the maker and Richard Roe is the pajee. 

100. When things are sold on credit, the buyer may give either his oral 
or written promise to pay for them at some future time. If the latter is 
given,, it is usually in the form of the note shown above, and since it is property, 
it is entered in the records according to the rules already learned for journal- 
izing property — debit that which comes into the business and credit that 
which goes out. 

101. Notes in our favor we call "Bills Receivable." Those which we make 
in favor of others are called "Bills Payable." 

102. At the time we receive a bill receivable we debit Bills Receivable 
account. When it becomes due and is paid by the maker, we credit Bills Re- 
ceivable account, because we give it back to the maker and thus it goes out of 
the business. 



BILLS RECEIVABLE AND BILLS PAYABLE 65 

103. When we give our note to another person, we credit Bills Payable. 
When we pay it at maturity, we receive it back and therefore debit Bills Payable. 

Written Exercise 

The following transactions illustrate the Bills Receivable account. Using a 
journal and a ledger, journalize, post and make a trial balance. 
Apr. 1 — Student began business and invested notes signed by B. R. Skinner 
and E. H. Davis, .$ 500 and ,| GOO. (Bills Receivable to Student.) 

2 — Received of W. H. Cobb on account his 2 months' note, $ 159.38. 

3 — D. C. Duncan remits his note to balance his account, $ 237.45. 

4 — B. R. Skinner pays his note in cash, $ 500. 

5 — Received of A. J. Goss his note to apply on account, $ 376.50. 

6 — E. H. Davis remits his check for his note, .$ 600. 

7 — Sent Telephone Company a check for ,$15 in payment of three 

months' service. 

8 — Received of A. H. Jones his note in full of account, $ 300. 

9 — Sold W. B. Weeks on his note, mdse., $ 194.30. 

10 — Sold G. A. Marden on his note, mdse., $574.50. 

11 — Gave W. H. Tucker on account W. H. Cobb's note, $ 159.38. 

12 — Received note from G. A. Bruce on account, $200. 

13 — Bought Merchandise of W. R. Patten amounting to $ 792.58. 

Gave A. J. Goss' note in part payment, $ 376.50. 

14 — Received cash for note signed by B. F. Jenness, $ 150. 

15 — D. C. Duncan pays cash for his note of the 3d inst., $237.45. 

16 — Received note at 30 days from E. Norton on account, $500. 

17 — Received from W. H. Page 60 day note in full of account, $458.47. 

18 — Loaned F. H. Morse cash on his 30 day note, $400. 

19 — Received note from F. W. Perkins on account, $300. 

LESSON 27 

Journalize and post the following transactions illustrating the Bills Payable 
account. Make a trial balance. 
May 1 — Issued to G. H. Marsh my note to apply on account, $ 350. 

2 — Bought Mdse. of G. A. Bruce on my note, $ 362.85. 

3 — Received from E. H. Davis to apply on account his note for $ 196.34. 



66 PRINCIPLES OF BOOKKEEPING 

4 — Paid by check my note in favor of J. L. Brewster, $ 525. 

5 — Gave J. V. Chase my note for $ 257.43 to apply on account. 

6 — Sold G. W. Tucker Mdse. and received in payment my note made 

in favor of G. H. Marsh, $ 350. 

7 — Gave H. H. Putney my 30 day note for rent of store, $ 150. 

9 — Gave G. H. Tucker my 60 day note to apply on account, % 150. 

10 — Paid my note of the 5th by check, $ 257.43. 

11 — Bought of G. W. Gate on my note, mdse., $ 775. 

12 — Received of A. T. Howard to balance his account my note of the 

3d made in favor of C. H. Bruce, $ 362.85. 

LESSON 28 

Journalize, post, and make a trial balance. 
June 1 — Student began business and invested cash, $ 2000. 

2 — Paid one month's rent to date, $ 75. 

3 — Bought for cash, 100 bbl. flour at $ 5.75. 

4 — Sold for cash, 15 bbl. flour at $6.15. 

5 — Sold James H. Warren on account, 20 bbl. flour at $ 6.20. 

6 — Drew for private use, $ 25. 

7 — Bought of B. W. Scott on account, 50 bbl. flour at $5.70. 

8 — Sold James Brown on his note at 60 days, 25 bbl. flour at $6.18. 

9 — Bought of D. J. Wright on my note at 30 days, 50 bbl. flour at 

$5.65. 

10 - — Received cash from James Brown for his note, $ 154.50. 

11 — Paid my note in favor D. J. Wright, $282.50. 

12 — Sold to C. M. Johnson mdse. amounting to $840. Received in 

payment his note for $ 400 balance in cash. 

13 — Paid by check, freight bill for month, $45. 

Written Exercises 

A. Assuming that James Brown lives in your city or village, write the note 
mentioned in lesson 28, transaction June 8. 

a. Who is the maker ? 
h. Who is the payee ? 
c. When will the note be due ? 



BILLS RECEIVABLE AND BILLS PAYABLE 67 

Note. — When a note reads "two months after date," it will be due the cor- 
responding day in the second month after it is made, or when there is no such 
day, the nearest one to it. Example: A note made Dec. 31, 1912, to run 
two months, will be due February 28th, as there is no 31st in February. If, 
however, the note had been made out for GO days instead of 2 months, it would 
have been due March 1st, as actual days must then be counted. 

B. Write the note mentioned in lesson 28, transaction June 9. 

a. Who is the maker ? 

b. Who is the payee ? 

c. When will the note be due ? 

Interest and Discount 

C. Interest is the sum paid for the use of money. The legal rate of interest 
is that rate which can be collected on an interest bearing obligation when no 
rate is mentioned. All obligations in which interest is stipulated and all over- 
due obligation? draw interest. 

The maximun rate is the highest rate that can be lawfully contracted for. 
A rate of interest higher than the maximum rate is called usury. 

Dis-^ount is an allowance made for the prepayment of an obligation. It is 
computed the same as interest. 

When we pay interest to others, interest is debited. 

When we allow discount to others discount is debited. 

When interest is paid to us, it is credited. 

When discount is allowed by others to us it is credited. 

Interest and discount applies only to allowances on notes and other commer- 
cial paper. Allowances on invoices are called Mdse. Discount, and are journal- 
ized the same as interest and discount. 

Journalize, post, and make a trial balance. 
Jan. 2. My interest bearing note of Dec. 2, 1910 for $200 in favor of A. H. 
Whitney is due to-day. Pay same in cash. (Debit Bills Payable, 
$200; debit Interest, $1 ; and credit Cash, $201.) 

2. Received cash of J. D. Summers for his interest bearing note of Dec. 2, 
1910, $300. 

3. Gave Henry Richards my interest bearing note for three months, to 
apply on account, $680. 



68 PRINCIPLES OF BOOKKEEPING 

4. Received a 30 day interest bearing note of Charles Bowen, $400, to 
pay for invoice of the 3d ult. 

5. Received cash of H. II. Mason in full for note of $780 and interest 
from Dec. 8, 1910. 

6. Paid my interest bearing note favor of Geo. A. Strong with interest at 
5% for 60 dciys. Face of note, $460. 

7. Discounted at Commercial Bank the note received from Charles Bowen 
on the 4th inst., receiving cash for the proceeds. 

8. Prepaid my note favor of Henry Richards given the 3d inst. less dis- 
count to maturity. 

9. On Dec. 1, 1910, I gave Henry Wilson a 90 day note with interest at 
5 % in full settlement of my account. At his request I pay same to-day 
less discount to maturity. Face of note, $920. 

10. On Dec. 10, 1910, H. B. Stone gave me his 60 day note for $260 with 
interest. He pays same in cash to-day less discount to maturity. 

LESSON 29 
REVIEW QUESTIONS 

Lessons 26, 27, and 28 

97. What is a promissory note ? 

98. What are the principal parties to a note called ? Explain the relation 
of each party to the note. 

100. What use is made of notes in business ? Is a note considered property ? 

101. Define Bills Receivable. Bills Payable. 

102. Give the rule for journalizing Bills Receivable. 

103. Give the rule for journalizing Bills Payable. 

What is interest ? 

What is meant by legal rate ? 

What is the legal rate per cent in your own state ? 

What is meant by the term usury ? 

What is the penaky for charging usury in your state ? 

What are the rules for journalizing interest ? 

What is discount ? 

How is it distinguished from merchandise discount ? 

How are discount and merchandise discount journalized ? 



BANKING 69 

LESSON 30 

BANKING 

104. All business men deposit their money in the bank and pay bills by check. 
This does away with the necessity of handling large sums of money, making 
change, and is in every way much safer than using currency. When a debt is 
paid by check, the one who receives the check cannot cash it at the bank without 
writing his name on the back of the check, which is called indorsing it, and thus 
the canceled check becomes a receipt for the money paid when it is returned to 
the one who wrote it bv the bank on which it was drawn. 




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X\evwa\:Us 



Illustration 15 

105. (.4) The procedure necessary to open an account at the bank is simple. 
Select the bank you wish to deposit in, and if you have an acquaintance who is 
known at this bank, ask him to introduce you to the cashier. If you are known 
in the community, an introduction, though desirable, is not necessary unless the 
rules of the bank require it. The cashier will ask you to fill out a signature card 
like above illustration 15. You must decide on the exact form of signa- 
ture you will use and after writing it on the signature card do not use any other 



70 



PRINCIPLES OF BOOKKEEPING 



form. Consult your teacher as to the best way to write your name. It is 
quite customary to use only the initials when there are two given names. The 

three initial letters should be 
joined, if possible, to facilitate 
the writing of your signature. 
Be sure the signature you adopt 
is distinctive and perfectly legi- 
ble. Simplicity is best, as a 
simple signature is more legible 
and much less likely to be forged 
successfully. 

(B) Having entered your 
signature on the card provided by 
the bank for this purpose, you will 
next make out a deposit ticket 
similar to the one shown in illus- 
tration IG. Hand this ticket 
with your money to the cashier 
and he will enter the amount to 
your credit in a little book called 
the "pass book" or "bank 
book." This is your receipt 
for the deposit. Whenever you 
deposit money, this bank book 
should be presented to the 
one receiving the deposit, for 
entry. 

(C) If you should forget your 
bankbook, make out two deposit 
tickets; mark one "duplicate" 
and hand them to the cashier with 
your deposit. He will stamp one 
of them in some way to indicate 
that the deposit has been re- 
ceived and you will keep this one as a receipt. The next time you bring your 
bank book to the bank hand this "duplicate" ticket to the cashier and ask 
him to enter it in your book. 



DEPOSITED IN 

Farmers Bank 

Rochester. Minn. 


,yZ^^ 2-/. 191 c?. 




1 


PLEASE LIST EACH CHECK SEPARATELY 

1 




%rn 


CENTS 




^^o 






/ 


^ro 


Checks as Follows: 


^(P o 






/ .ro 






^,r 


































Total 
Exchange 

SEE THAT ALl. CHECKS ETC 


-7../:^ 


^o 


/ 




ARE ENDOR 


3ED 



Illustration 16 



BANKING 71 

(D) After your deposit is entered, the cashier will give you a blank check book 
containing checks for your use. The forms of the check and stub are shown in 
illustration 17. The form of check should be studied and practiced until you can 
write a check on blank paper. These checks are furnished for convenience, but 
the bank will pay a check made out on any kind of paper if it is properly written. 
Always use check blanks when possible, but if you have occasion to write a check 
where you can get no blank, tear off a piece of good quality paper about eight 
and one half inches long by three and one half inches wide and write the check, 
using the form you have learned. 



1°. ^ r Tf^ 



5^ 



QVi(^^^^.^^f7^ 7^J^ 



lance Bro't For'd 
Amt. DepoEiied 

Total 
Ami. This Check 
ice Carried For'd 



yss so 



FARMERS BANK 



Rochester, Minn., — ^>-^A- ^ ?. 191 d::^ 
Pay to the /^ ^ . 

Order of ( yT / f^,^r^ Jl^^/ — - — $ / (P t9 — 



'<~Z^^yyt^ yi^^^^M^^^^- 



.Doll.-! 



Number 



Illustration 17 

(E) At your convenience deposit all money, checks, post-office money orders, 
bank drafts, etc., in the bank. Write your name on the back of each check, 
money order, or draft before handing your deposit to the cashier. By doing 
this you transfer your title to the instrument ; guarantee that the instrument 
so indorsed is properly made out ; that the signatures already on the instrument 
are genuine ; that you are the rightful owner of the instrument ; and that if it 
s not paid promptly when due by the one who is supposed to pay it, you will pay 
it yourself, providing the bank gives you prompt notice of its failure to collect 
it of the other party. 

{¥) Once each month, or once in two months if your checks are not 
numerous, leave the bank book at the bank to be "written up." The 
total amount drawn out will be deducted from the amount of the deposits 
and the balance to your credit in the bank will be indicated. You should 
compare this amount with the amount shown by the balance in your check 
book. All of the checks you have drawn will be canceled and returned to 
you with your bank book. File them as receipts for the payments which 
they represent. 



72 PRINCIPLES OF BOOKKEEPING 

106. It should be remembered that banks welcome small deposits as well as 
large ones. Your bank balance may be small, but the aggregate of small balances 
is large and the bank is able to handle a large number of small accounts 
at a profit. Do not feel that you must wait until you have a large amount 
to deposit. 

107. (A) There are many reasons why you should early establish a 
banking connection in addition to those mentioned above. Your financial 
standing in your own community will be improved by opening an account 
at a bank and paying by check. When you receive checks, money orders, 
etc., you will have no trouble getting them cashed, while if you are not 
known at any bank, you will need to be identified before any bank will cash 
them for you. Then, too, you will need to buy bank drafts to use in re- 
mitting money long distances, and if you have no bank account, the bank 
at which you buy a bank draft will charge you for it. Generally banks issue 
drafts to . customers without charge. The bank draft is illustrated and ex- 
plained in lesson 34. 

(B) It may become necessary to borrow money from time to time to use in 
your business. One of the functions of the bank is to loan money to customers 
at interest, for short j^eriods of time, usually not over four months, on good 
security. This is in many ways the most important ser\ice rendered by a bank 
to a community. 

108. All checks received by you should be deposited promptly, as you will 
lose the amount called for if you delay and the bank becomes bankrupt in the 
meantime. Checks should be deposited before the close of banking hours on 
the day following their receipt. 

109. It is sometimes desirable to have the check show on the face of it that 
the money is on deposit in the bank to meet it. When this is the case, take the 
check to the bank and ask the cashier to certify it. He will stamp it "certified," 
or "good" and sign his name. From then on, the bank is obligated to pay it 
and nothing less than bankruptcy of the bank will keep the rightful holder of 
the check from getting his mone}'. 

110. Short-time notes received from debtors should be made payable at your 
bank, and then you can readily discount them to secure money for immediate 
use. This means that the bank will advance the amount called for in the note 
less the interest to the date of maturity. You will be required to indorse the 
note, as explained in section 105 {E). 



REVIEW QUESTIONS 73 

Written Exercises 

A. You have $ 10 in paper money ; $ 3 in silver ; $ 2 in small change ; and 
a check for S 7.50 from Henry Rogers. Rule a deposit ticket form and make 
out a ticket to deposit the above cash. 

B. You have a $25 check from Morris Mason ; a $5 gold piece; 4 half dol- 
lars ; 3 quarters ; and 30 pennies. Suppose you forgot to take your bank book 
to the bank. Proceed to make the deposit without it. 

LESSON 31 
REVIEW QUESTIONS 

On Lesson 30 

104. Mention the advantages of depositing your money in the bank and 
107. (A) paying by check. 

105. (A) Tell how to open a bank account. 

105. (A) What have you learned about the use of a signature ? 

105. (B) What is a deposit ticket ? 

105. (B) What is the bank book and what is its purpose ? 

105. (C) If you forgot to take your bank book with you to the bank, how 
would you proceed ? 

105. (D) Is it absolutely necessary to use one of the blank checks furnished 
by the bank ? 

105. (E) What do you deposit in the bank ? 

105. (E) What is meant by indorsing checks, etc., before depositing 
them ? 

105. (E) What is the contract of the indorser ? 

105. (F) What is meant by "writing up" the bank book? How often 
should this be done ? 

105. (F) What will you do with canceled checks returned by the bank ? 

106. What is the attitude of the bank toward small depositors ? 

107. (B) What is one of the most important services rendered to a community 
by a bank ? 

108. When should all checks received be deposited ? Why ? 

109. Explain what is meant by getting a check certified. 

110. Where should short-time notes be made payable ? Why ? 



74 PRINCIPLES OF BOOKKEEPING 

LESSON 32 
THE BUSINESS LETTER 

111. In agricultural as well as in other lines of business it is necessary to 
write many letters, and since nothing more surely indicates the kind of business 
men we are than the letters we write, we should give some thought to this matter. 

112. A simple letterhead should be used. This may consist of the name 
of the farm, the address, and the name of the proprietor. For example : 

HILLHURST FARM 

F. E. HovEY, Proprietor 

Avon, N. Y. 

When such a letterhead is used, it is not necessary to write the address of the 
proprietor as a part of the heading of the letter. 
Other forms of simple letterheads are shown below. 

Plea-sant Grove Farm 

J. C. HANSON, Proprietor 

FINE APPLES, PEACHES, AND OTHER FRUITS GENERAL FARMING AND STOCKRAISING 

Anderson's Orchard Home Farm 

g. n. anderson 

Talent, Oregon, 19 



Merritt Greene & Son 

'EDGEWORTH" 

HOLSTEIN CATTLE 

breeders of "edgeworth" farm. 

pure bred winter wheat, "linn brook" farm. 

oats, and corn. linn brook dairy co. 

Marshalltown, Iowa. 



BUSINESS LETTER 75 

MAPLE HILL FARM midland farm 

J. C. FARQUHAR, Proprietor JJ[^ 1 Harpcr 

R. F. D. No. 1 

R. F. D. No. 2 

Farmers Phone 14x2 

PHIL F. STANDISH MILTON STANDISH 

Standish Brothers 

FRUIT RANCH 

THREE AND ONE-HALF MILES 
EAST OF ESTACADA 

Est ACADA, Oregon, -19 

THE WALNUT HILL FARM 

FAY F. DEAN 

Shadow Brook Farm . ^ _ 

AUG. PAASCH 

R. H. WALLACE. Proprietor - ;^^= 

FRUIT GROWER 
HOOD RIVER, OREGON 

nS. Select a good quality of white paper, 8| X H- Use the best writing 
fluid (not ink) and a medium pen. A blotter should always be kept at hand, and 
its use will materially improve the appearance of your letters. Many farmers 
find it desirable to use a typewriter. While speed cannot be acquired without 
much practice, it is possible to learn to write accurately and with a fair degree of 
speed in a very short time. Often the wife or daughter will do this part of the 
office work. Typewritten letters create a favorable impression, and as an 
advertisement easily justify the necessary expenditure of money and time to 
make their use possible. If pen is used, the paper should be horizontally ruled 
below the heading. Some prefer to use plain paper, and a little practice will 
enable one to keep the lines straight. 

114. The parts of a letter are (1) the heading, which consists of the address 
of the writer and the date ; (2) the name and address of the one to whom the letter 
is written; (3) the salutation, consisting of "Dear Sir," "Sir," or some other 
appropriate expression ; (4) the body, which includes the text of the letter ; 



76 



PRINCIPLES OF BOOKKEEPING 



HiLLHURST Farm 

AVOfJ. N Y. 



(%>^,J/, 



/ 9 y-3 . 














-^:&. 




■£^-Z/~i^^ . 



Illustration 18 



(5) tlie complimentary closing, such as "Yours truly," etc. ; and (6) the signature 
of the writer. 

115. The above illustration is a proper form of a pen-written business letter 
having a two-line address. 



BUSINESS LETTER 77 

116. The following will illustrate a correct form of typewritten letter show- 
ing a three-line address : 

287 Main St. , 
Corvallis, Ore., June 6, 1913. 
Mr. Henry Thompson, 
682 State St. , 

Rochester, N. Y. 

Dear Sir : 

We are at a loss to know why you have ignored our several 
letters regarding the settlement of your account, which is 
long past due. Our treatment of you has not been such as to 
merit this apparent discourtesy on your part, and we dislike 
to believe it is intentional. 

In accordance with our established custom, we shall 
place the account in the hands of our attorney for collec- 
tion on June 20, unless we hear from you by that time with 
remittance or satisfactory explanation. 

Yours truly, 

H. C. Frey & Co. 

117. Letters ordering goods should be written with great care to insure 
prompt and satisfactory attention. When ordering from a catalog, the exact 
names, numbers, etc., should always be used. Each item, where there are 
several, should be written on a separate line ; shipping directions should be given ; 
and usually the letter should contain some statement regarding payment. The 
following is a good form for such a letter : 

R.F.D. 1, 
Geneva, N. Y., June 1, 1913. 
Geneva Hardw^are Co., 

Geneva, N. Y. 
Gentlemen : 

Send me the following items by parcel post and I will remit by check upon 
receipt of bill : 

5 lb. No. 8 Wire Nails 

1 Sargent Greenleaf Padlock, No. 5 

Very truly yours, 

Henry Holmes. 



78 PRINCIPLES OF BOOKKEEPING 

118. (A) ^\lien payments are made by mail, a brief letter should accompany 
the remittance unless the invoice being paid can be inclosed for receipt. When 
a letter is written, the amount, kind, and purpose of the remittance should be 
stated. A simple form of such a letter is shown in the following illustration : 

R.F.D. 1, 
Geneva, N. Y., June 3, 1913. 
Geneva Hardware Co., 

Geneva, N. Y. 
Gentlemen : 

Inclosed find check on Citizens' Bank of Geneva for $1.25, the amount of your 
invoice of the 2d inst. 

Yours truly, 

Henry Holmes. 

So far as possible all payments should be made by check. Since banks in 
distant places will charge a small amovmt for cashing your check, however, you 
should save your creditor this expense by making your remittance either by bank 
draft or post-office money order. The former will be issued by your bank without 
charge, while the latter will cost a small amount. Only when your post office 
is nearer your home than your bank Would it be advised that you use the post- 
office money order. The bank draft will be illustrated and explained in lesson 34. 

(B) Accurate postal information is printed for the benefit of all persons 
who are interested. Postmasters will furnish a postal guide without charge. 

Written Exercises 

A. Arrange a suitable letterhead for your father's farm. 

B. Using paper 8| X 11, write a letter to Marshall Field & Co., Chicago, 
111., or any other firm, ordering five articles. Use their catalog, if possible, and 
follow directions regarding names of items, etc. 

C. Your note mentioned in lesson 28, June 9th, and written in exercise B, 
lesson 29, is due. Write a letter to accompany your check on Third National 
College Bank of your place, which you will send in payment. 

D. From postal information books which you may secure from your post- 
master, ascertain the regular postage rates and the parcel-post rates to the prin- 
cipal sites of the country and to the principal places near your home. 



REMEW QUESTIONS 79 

Optional Exercise 

Study the uses that can be made of the parcel post by you, either in 
buying from or selling to persons outside your immediate locality. 



REVIEW QUESTIONS 
On Lesson 32 

111. Why should we give special thought to our letters ? 

112. Of what should the letterhead consist? What is the advantage of 
using a letterhead ? 

113. What materials are desirable to use in the correspondence of a business ? 

114. What are the parts of a business letter? 

115. 116. How should these parts be arranged on the letterhead ? 

117. What directions should be observed in writing letters ordering things? 

118. (^4) What directions should be observed in WTiting letters accompany- 
ing remittances ? 

118. (i5) Where can you get accurate postal information ? 



80 



PRINCIPLES OF BOOKKEEPING 



LESSON 34 
BUSINESS FORMS 

119. Among the business forms with which every business man should be 
famihar are the following : Invoice, promissory note, check, bank draft, receipt, 
and simple contract. 

120. (.4) An invoice is an itemized list of goods sold, or services rendered, 
showing date, prices, terms, and amount. The following is an illustration of a 
simple form : 



NIn ^.^(^ 



M ^^. 



Akron. O. 



^-^^^ 



2.5- 19 /J~. 



'/.^- r z ^ ^ 



^J/Zj-rr-T^^ 



'/j:;^^^^.^y^^^ // 1/ 



Bought of 

GENERAL FARM IMPLEMENT COMPANY 



TERMS //o , / ^ 



1^1 COURT STREET 



Telephone— Main 1694 



" sfc ^ ^-^- z- ig^^ ! ^ 



-V-^^ 



~V7^>^,^'^^ /->f^^y7^^^!r:i^,o^^ J 



/^-ro 



^: 



/.r.^ 



^^/L^-^ 2-^ 




-jh-e^l^ ^.(^.^ 



^zih^..^^2^.<i^^,^7^y'^ ;f^^^/- -r^-^^,^^ ^ ^y 



Illustration 19 

(5) Blank invoice pads can be secured at any stationery store. Names 
and place can be written in. It is not, therefore, necessary to have printed forms 
unless the number used would justify the additional expense. Sales slips like 
illustration 20, page 81, can also be purchased. 

(C) These slips are made in duplicate, and by using a sheet of carbon paper 
under the original, a second copy can be made by one writing. The carbon copy 



BUSINESS FORMS 



81 



and original are separated by a perforated line. The original is sent to the 
purchaser and the copy is left in the book as the seller's memorandum of the 
sale from which proper book records can be made. 

(D) When an invoice, or a sales slip, is returned with the remittance, it 



Name 




Addre... S'7^r^:^j^(S/^^:^.>JM 




/ ■' / ' \ 


Sold by Am't Rec'd 




T-O eU7^-^^^^ (a)^ Z2^ 


4/ 


^r) 






' r 


J 








y 






/^ 


^Ao 




























































28 









































Illustration 20 

should be marked "Paid," with date and signature, and sent back to the 
remitter as a receipt. 

121. The promissory note is illustrated and discussed in lesson 25. 

122. {A) A check is a written instrument in which a person or firm having 
money in a bank orders the bank to pay a certain sum to a certain person, or his 
order, or to the bearer, and charge the same to his account. The most common 
form is shown in illustration 21a, on the next page. 



82 PRINCIPLES OF BOOKKEEPING 



Fourth National Bank 

SAN JOSE. CALIF //'/ /^^-^^y 2- 191 ^ 

PAY TO THE ORDER OF /(^ .^^-^^T? ^..--r^ Vt^^^^T^^ ' $ 2- (9 ^ ^^ 



-^^^V^^-t:^. ^'^r^HU^'^^^^^^^ /CO 



/ ^K ^.^ (/,^^-^C^^ <^y^ 



DOLLARS 



No 



Illustration 21a 

(jB) All checks received must be indorsed by the payee, as was stated in 
lesson 30, before they can be cashed at the bank. There are several kinds of 
indorsement, but two are of special importance. One is called a "blank" 
indorsement and the other a "full" indorsement. The following illustration 
will make plain the difference between these two kinds : 




Illustration 21b 

Suppose John Doe, living in Rochester, N. Y., owes Richard Roe of Clyde, N. Y., 
$200. He writes the check shown as illustration 21a on the Fourth National 
Bank, in which he has deposited money, and sends it to Richard Roe, who, 
upon receiving it, writes his name on the back of it, as is shown above under 
blank indorsement, preparatory to cashing it at the State Bank of Clyde, with 
which he does his banking business. The effect of this blank indorsement is 
to make the check payable to bearer ; that is, any one who gets possession of it. 



BUSINESS FORMS 83 

It will be readily seen that this is not the safest way to indorse. If Richard 
Roe should lose the check, any person finding it could cash it at the bank, and 
Roe would lose the amount unless he could recover it from the dishonest finder 
who cashed it. If, however, Roe had indorsed as is shown under full indorse- 
ment, no one except the State Bank of Clyde, as indorsee, would be entitled 
to the check. No finder could cash it anywhere without first getting the 
signature of the State Bank of Clyde to whose order it was indorsed by Roe. 
This kind of an indorsement is called a "full" indorsement and is the safest one 
to use where there is any possibility of the check getting into the hands of a dis- 
honest person not the rightful holder. Checks and notes made in the form 
illustrated are negotiable and may be passed on from one to another by indorse- 
ment and delivery, or by delivery only after being indorsed in blank. The con- 
tract of the indorser is stated in lesson 30 (105), and this contract is made by 
every regular indorser except one who writes "without recourse" over his 
indorsement, the effect of which is to relieve the indorser of that part of the con- 
tract which provides that he will pay the amount if the one who is supposed to 
do so does not. 

(C) The rightful holder of any instrument who indorses it for the purpose 
of passing it on to another is called a "regular" indorser. An "irregular" in- 
dorser is one who is not a party to the original instrument, but who writes his 
name on the back of the instrument to guarantee that it is properly drawn ; that 
there are no defects in it that will interfere with its collection ; that all signatures 
on the instrument are genuine ; that the parties to it are legally competent to con- 
tract ; and that if it is not paid when due if properly presented by the legal holder, 
he, the indorser, will pay it if he receives prompt notice of its non-payment. 

123. As was stated in a previous paragraph, before receiving the money on 
any check, the paj ee, or indorsee, must indorse it, and thus the check becomes a 
good receipt for the payment when it is returned by the bank to the one who 
drew it. To improve the check as a receipt, a brief statement as to what the 
check was given for should appear on its face under the amount in words and 
near the lower left-hand corner. If an invoice is being paid "Invoice of Apr. 1, 
'13" will be sufficient. Attach the canceled check to the invoice and file to- 
gether. If a note is paid by check, "Note due Apr. 1, '13" would be sufficient. 
A check for groceries might have this memorandum : "Groceries, April, 1913." 
See illustration 17, page 71. 

124. (A) All banks have money deposited in New York City, which is the 
money center of the United States. Banks in the Middle West would also carry 



84 



PRINCIPLES OF BOOKKEEPING 



an account with a Chicago bank. There are many local banking centers in a 
country as large as ours. Since New York City is our greatest money center 
and the only one in which all banks in other cities have deposits, it will be used 
in our study of the bank draft. 

(B) Horace Stanford lives in Elmira, N. Y., and has money deposited in the 
Commercial Bank of that city. He desires to pay $ 100 to D. F. Ward of 
Portland, Ore. As the most satisfactory form of remittance in this case 
would be a New York bank draft, he goes to the Commercial Bank of Elmira 
and hands the proper clerk the following check : 



Pay to the order of _ 



COMMERCIAL BANK 

ELMIRA, N. Y. 

^^^^^/ , 191 
$ /^^- 



Dollars 



Numbe 



r r^ 



-r-^vV-i^-^.^^^^..^^-^.^^^ ..^c^.^^. 



niustration 22 

(C) A ticket like the following is filled out and handed to the clerk with the 
check : 



COMMERCIAL BANK 


— 


Requires the following New York Drafts 


1 


1 


Payable to 


...... 1 


f^^yj^ 


/^^ 









































Illustration 23 



BUSINESS FORMS 85 

^ (D) The following draft is made out by the clerk, signed by the cashier, and 
handed to Horace Stanford : 



COMMERCIAL BANK 

ELM IRA, N. Y. 



Pay to the 
Order 






To Merchants Bank, 

New York City ,^<?t/. 




Cashu 



Illustration 24a 



{E) Since this draft is payable to Horace Stanford, or his order, he must 
indorse it before sending it to D. F. Ward. For reasons given in paragraph 122 
(J5), page 83, he indorses it in "full," as follows : 




Illustration 24b 



(F) The draft is now sent with a letter to D. F. Ward, Portland, Ore., who, 
when it is received, takes it to the Third National Bank of Portland, where he has 



86 PRINCIPLES OF BOOKKEEPING 

an account, and after indorsing it, as is shown above, receives cash or credit, as 
he may choose. Since Ward writes his indorsement at the bank, a "blank" 
indorsement will be satisfactory, 

(G) The Third National Bank of Portland makes no charge for cashing the 
draft, because it also has money on deposit in some New York bank and draws 
drafts for its customers against its New York accoiuit. Every day it is necessary 
for the Third National to send money or its equivalent to its New York bank 
to maintain a balance in its favor to draw on, and it is much more convenient 
and safe to send claims on New York banks instead of money. Therefore, it 
is glad to cash all the New York drafts it can get without charge. The draft 
cashed for Ward will be sent to the Chemical Bank of New York with which 
the Third National Bank of Portland has its New York account ; the Chemical 
Bank will collect the amount from the Merchants' Bank and credit the account 
of the Third National of Portland ; the Merchants' Bank will deduct the amount 
from the balance of the Commercial Bank of Elmira and send the canceled draft 
back to that bank to be kept on file. 

(H) If Horace Stanford had not required that the draft be made out in his 
own favor so that he could indorse it to Ward, the canceled draft would not show 
that Stanford sent it to Ward, and thus it would be less valuable as a receipt. 
At any time Stanford may get the canceled draft from the Commercial Bank, 
if any question should arise as to whether or not the amount oWed Ward had been 
paid. 

125. (A) Blank receipt books can be purchased of any stationer at small 
cost. The proper form of a receipt is as follows : 



Spokane. Wash., y/f^^^^y/^ 191 tf . 

RECEIVED OF -T^^^^-Z^-^-^v /// . yi^.-r^-fyf.^/^^^ — 

^^-y%.^e^s AZ- t^r-o-y^y^^ Co^-f.,^^!^jCi^-^^^^.^^\ -771 ■ ^ — DOLLARS 



Illustration 26 



BUSINESS FORMS 87 

(5) While a receipt is not positive proof of payment, it is strong evidence 
and one should be demanded whenever debts are paid in currency. When 
checks are used, no receipts are necessary if the directions given in paragraph 123 
are followed. 

126. (A) A contract is an agreement between two or more competent persons 
to do or not to do some lawful thing for a consideration, or in writing under seal. 

(B) No special formality is necessary except in a few cases which come under 
a law known as the statute of frauds, requiring that there must be written evi- 
dence in the following contracts : 

1. Those in which one person agrees to be responsible for the debt of another. 

2. Those in which an administrator or executor promises to be personally 
responsible for a debt of the estate he is settling. 

3. Any contract made in consideration of marriage except mutual promises 
to marry. 

4. Any contract for the sale of lands, or any interest in or concerning them. 

5. Any contract which by its terms could not be carried out within the space 
of one year from the date of making. In New York State a lease of land for one 
year to begin in the future is an exception. 

6. Contracts for the sale of personal property, such as goods or merchandise 
above a certain value (from $30 to $200, according to the laws of the different 
states) unless some or all of the goods be delivered and accepted ; or all or part 
of the purchase price be paid. 

Practically all other contracts may be made orally, but since it is often diffi- 
cult to prove an oral contract, the written one is recommended whenever possible. 

(C) The following simple wording may be used in any ordinary contract : 

Contract 

This agreement made this first day of June, 1913, between H. R. Chase of 
Geneseo, N. Y., and George Strong of the same place, provides as follows : 

That H. R. Chase agrees to work for George Strong one year, as farm 
manager, for a monthly salary of One Hundred Dollars ; and that he will begin 
his term of service on June 15, 1913 ; and, further, that George Strong agrees to 
pay H. R. Chase the above salary for services as manager of his farm, and that 
said salarv shall be pavable semi-monthly on the 1st and 15th of each month. 

H. R. Chase. 
George Strong. 



88 PRINCIPLES OF BOOKKEEPING 

Such contracts should be made in duplicate, one copy being kept by each party. 
The practice of making a written and signed memorandum of each agreement 
entered into should be early established. It will save many dollars and much 
trouble and amply repay the little effort necessary to do the writing. Ink should 
be used when possible, but indelible pencil will answer quite as well and will often 
be more convenient. 

Office Equipment 

127. (^4) It is not necessary that an elaborate office be maintained by a 
farmer, but there are a few conveniences that will go far toward making it pos- 
sible to put the farm upon a business basis. 




Illustration 26 



(B) A desk, with drawer space, filing space, and safe combined is not very 
expensive and should be in the home of every up-to-date farmer. 

(C) A simple box file like illustration 27 can be secured of any stationer. 
It contains alphabetical divisions and can be used for filing receipts, receipted 
bills, canceled checks, etc. A separate one should be provided for letters. 
Before a letter requiring a reply is filed, a memorandum of the reply should 
be made on the back. This should be brief. If the typewriter is used, a carbon 
copy can be made and attached to the letter for filing. 



BUSINESS FORMS 



89 



(D) The deep drawer in the desk, illustration 26, contains a complete outfit 
for filing all kinds of papers according to the most improved business methods 
and should be used instead of the box files, if such a desk is used. 




Illustration 27 



Written Exercises 

A. Write a proper form of invoice for your father's farm, or other business. 

B. Make out an invoice for four items of farm produce, sold by you, showing 
all the necessary information. 

C. Suppose the invoice called for in B is paid to-day. Receipt it. 

D. Make out the check used to pay the invoice called for in B. Supply 
the name of the bank. 

E. You owe James Rollins $50 more than the amount of the check re- 
ceived above. You wish to pay the debt by transferring this check to James 
Rollins and by giving your own check for the balance. Take the necessary 
steps to make the payment. 

F. You wish to pay $ 100 to Richard Roe, who lives in a city about 200 
miles from your home. (Use any city.) A bank draft is preferable for such a 
remittance. Draw the check necessary to purchase one at College National 
Bank, where you have money on deposit. 



90 PRINCIPLES OF BOOKKEEPING 

G. Trace the bank draft until it is returned to the College National Bank 
of your place. 

H. Henry Watson owes you S 59.60 and he has paid you in currency. Write 
a receipt. 

/. Your father's grocery bill at Brown & Co.'s grocery for the current month 
is $ 18.50. He asks you to write a check on College National Bank to pay this 
bill. Write one that will be a good receipt when canceled. Your father will 
sign the check after you have written it. 

J . Your father has been asked to plant sweet corn for the Excelsior Canning 
Co. of your place on the following conditions : He is to plant 10 acres ; care for 
it properly ; harvest it ; and draw it to the canning factory when required to do 
so by the factory. It is to be weighed at the factory and paid for in cash at the 
rate of $ 8 per ton. Draw up a suitable contract. 

LESSON 35 
REVIEW QUESTIONS 

On Lesson 34 

119. What business forms should every business man be familiar with ? 

120. (.4) What is an invoice ? {B) Is it necessary to have printed invoice 
blanks ? 

120. (C) What are sales slips and how are they used ? 

120. {D) What should be done with an invoice when it is returned with a 
remittance ? 

122. {A) What is a check ? 

122. (2?) What must be done before checks received can be deposited ? 

122. (5) What is a "blank" indorsement? A " full " indorsement ? 

122. {B) W^hat is the danger in the use of the blank indorsement ? 

122. {B) How may checks be passed on from one to another ? 

122. {B) What is the effect of writing "without recourse" over an indorse- 
ment? 

122. (C) Distinguish between "regular" and "irregular" indorser. 

123. What should be done to make the canceled check a good receipt ? 

124. {A) Why is a New York City bank used in the study of a bank draft ? 
124. (D) What is a bank draft ? 

124. {H) In whose favor should a New York draft be made out ? Why ? 



BUSINESS FORMS 



91 



124. (H) If at any time a dispute should arise about an amount paid by a 
bank draft, what can the one who sent it do ? 

125. (A) Are receipt blank books easily obtained ? 

125. (B) Is a receipt proof of payment? What is it? Should receipts 
always be insisted upon by one who is paying a debt ? 

126. (A) What is a contract ? 

126. (B) Is any special form of contract usually required ? What contracts 
must have some written evidence ? 

126. (C) Why should contracts be made in duplicate ? What may be used 
as a convenient substitute for pen and ink in making contracts ? 



FARM ACCOUNTS 



FARM ACCOUNTS 

INTRODUCTORY 

LESSON 36 
FARM SET I 

The father of George Enterprise, a mechanic in a small Middle Western town, 
was earning an average of fifty dollars a month at his trade. He was born and 
brought up on a farm of 160 acres, of which he inherited forty. He has now 
decided to take up intensive farming, specializing in pure-bred cattle, poultry, 
potatoes, strawberries, and blackberries. 

He has an opportunity to buy the entire equipment of a neighbor who is retir- 
ing. His savings are such that after paying for the farm equipment and house, 
hold goods, he has a cash balance of $125, including $20 due him from a 
neighbor. The local Farmers' Cooperative Credit Association holds a mort- 
gage of $ 2000 against the property. 

George, his sister Edith, and Mrs. Enterprise, will care for the chickens and 
do a little work occasionally in the garden. For this the household will receive 
eggs, poultry, garden produce, and the dairy products from a cow. Whenever 
Mrs. Enterprise needs it, cash to the amount of $ 100 is to be paid to her for 
the services of herself and children. 

Since Mr. Enterprise could return to town and resume his former occupation 
at $ 50 a month, he decides to draw $150 quarterly, and out of this he will pay 
the household as well as his personal expenses. Upon careful estimates, he 
decides to charge 60 per cent of the salary to crops, 20 per cent to live stock, 
10 per cent to general expenses, and 10 per cent to general repairs. 

The household accounts are kept by Edith on the form used in lesson 4, 
strictly separate from the business accounts. 

Before beginning his first year's business, Mr. Enterprise prepares his first 

financial statement, which he enters in the day book with a suitable explanation 

as follows : 

93 



94 FARM ACCOUNTS 

Financial Statement No. 1, Enterprise Farm^ 
April 1, 1911 

resources : 

Real estate, 40 acres at $ 200 $ 8000. 
Produce 

Potatoes, 35 bu. at 60 ^. $ 21 . 

Hay, 10 T. at $7 _70. 91. 
Horses and cattle 

2 Horses at $ 100. 200. 
I Mare 200. 
1 Colt over 1 year 125. 

1 Colt under 1 year 50. 

3 Cows at $ 100, over 2 years 300. 
3 Heifers over 1 year, at $ 75 225. 

2 Calves, under 1 year, at $40 80. 

1 Bull _50. 1230. 
Poultry 

50 Plymouth Rocks at $1 50. _ 50. 
Implements 

Potato planter 52. 

Potato digger 37. 

Walking weeder 15. 

14-inch plow 14. 

2-Section harrow 10. 

Wagon (old) 35. 

Delivery wagon 20. 

Road wagon (old) 40. 

Mower 45. 

2 Hay rakes 35. 
Manure spreader 100. 
Platform scales 16. 
Cultivator 17. 
Hand tools 8. 

Harness ^. 500. 

1 Part of this statement, as well as the plot, page 97, are from U. S. Farmers' Bulletin 

No. 325, entitled " Small Farms in the Middle West," by J. A. Warren. 5 lines long 



FARM SET 95 

Cash and in bank 55. 

Accounts and bills receivable 15. 

LIABILITIES : 

Mortgage favor Farmers' Coop. Credit Association, due 

October 1, 1919 $2000. 







Summary 








Real estate 










$8000. 


Crops 










91. 


Horses and cattle 










1230. 


Poultry 










50. 


Implements 










500. 


Cash 










55. 


Accounts receivable 




• 






15. 


Total 










9941. 


Less liabilities 










2000. 


Net worth 


year ]\Ir. 


Enterprise kept only a 


day 


$7941. 


During the first 


book, in which he 


recorded, not only his receipts 


and payments, 


but any 


data which would be of 


interest and value in 


the future 











At the end of the first year, March 31, 1912, he took another inventory. 

Written Exercise 

The student will now prepare the second financial statement in exactl}^ the 
same Form as the first from the data given below, and also prepare the state- 
ment of profit and loss, as outlined under paragraph 40. Two pages of journal 
paper will be required. 

Financial Statement No. 2, Enterprise Farm 

April 1, 1912 
resources : 

40 acres land , @ $200; 40 bu. potatoes @ 60^; 15 T. hay @ $7; 2 horses 
@ $100; 1 mare $200; 1 colt, over 1 year, $150; 1 colt, $75; 3 cows, over 
2 years, at $100; 3 heifers, over 1 year, @ $75; 3 calves, under 1 year, @ $40; 

1 bull, $100; 60 Plymouth Rock chickens® $1; potato planter, $50; potato 
digger, $63; walking weeder, $13; 14-inch plow, $13; 2-section harrow, $9; 
wagon (old), $30; dehvery wagon, $18; road wagon (old), $36; mower, $40; 

2 hay rakes, $ 25 ; manure spreader, $ 90 ; platform scales, $ 15 ; culti- 



96 FARM ACCOUNTS 

vator, $15; took, $10; harness, $22: bugg.v. $100: cash and in bank. $105; 
accounts and bills r>ecei\^We, $20. 

ujlbiuties: 

Meat^a^ faww Farmers" Cooperative Credit Association, due October 1, 
1919, $l7a\ 

Real estate 

Cropts 

Horses and cattle 

Poultry . 

Iliqil»Df»ltS 

Cash 

AcccNmts receivable 

Total 

Less Kabilities 

Net worth 



You will notice that he re\"alued ea^ article wherevej a change occurred 
both as to reduction (depreciation"^ and increase (appreciation) of value. This 
subject is discussed fully in lessons 14 and 4S. 

The pn^piietxir is now able to find the general result of the year's work, as 
f cJlows : 

Statfutnt of Profit and Loss. Yeak exdixg \L\.rch 51. 191 2 

Xet worth DOW 

Xet worth last year 

Profit 

Less salary 

6 p» CHit int«est on investment 

Xet profit 



Hiis kind of bookkeeping is better than none at all. but Mr. Enterprise now 
decides to install a complete but simple set oi books. especiaUy suited to the 
fiarming buaness. George has mastered this system in the pubUc schools and it 
is a^T^eed that he will keep the books for $ 5 per month and 5 per cent of the net 
annual preifits of the business. The $ 5 is to be paid out of the monthly wages 
of Mr. Enterprise and the share in the profits is to be paid after th.e yearly finan- 
cial statement has be^i made. 



FAE31 PLOT 



87 



LESSON 37 
THE FARM PLOT 

Mr. Enterpriisf:, being a progressive farmer, has decided on a definite scheme 

of rotation of rroDS for the Dunx/-e- of rnaintainin? the fertilir-' of the soil; of 



fjraa* ■ 



7 Aeret 
Potatoea 



7 Acres 
Grmma 



\ 



11 Acre 9 
Ptrmanent Pa at u re 



\ 



Mi*ce1lmMe»ma 




Ulustration 28 



securing the proper quantity and the right proportion of feed for his stock ; of 
keeping the soil in good physical condition, thereby reducing labor; and of so 
arranging the crops that the labor vdll be as evenly distributed as possible 



98 



FARM ACCOUNTS 



throughout the growing season. In order to realize this he has kept a rough dia- 
gram of the farm, as iUustrated on page 97. In order to keep the plots in perma- 
nent form, he now requests George to draw the plot to scale, four times the size of 
the figure in the book. Having done this, he can trace the outline with the aid of 
carbon paper and secure two or three copies at a time. (Typewriter carbon paper 
should be used to prevent blurring.) It is his intention to preserve these plots as 
permanent records of his farm operations. The reasons for this particular arrange- 
ment of the fields are interestingly explained in Farmers' Bulletin No. 325. 

Written Exercise 

Reproduce the figure, fllustration 28, page 97, to four times its size. Each 
line in the figure will be exactly double in length. You will find that the figure 
is drawn to a scale of 1 inch = 1 chain = 330 feet. First outline the work in 
pencil, then trace it in ink. Practice lettering until you can very nearly repro- 
duce the lettering in the figure. Hand in your work for approval. 

The Continuous Annual Statement 

In order to be able to compare the several items of the inventory from year 
to year, to guard against omissions and mistakes, and to save labor, Mr. Enter- 
prise and George decide to arrange the two preceding statements in the contin- 
uous form and to allow a column for the inventory at the end of the present year. 






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CONTINUOUS ANNUAL STATEMENT 



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102 FARM ACCOUNTS 

Written Exercise 

Arrange the statements given as Financial Statement No. 1, and Financial 
Statement No. 2, in tabular form like illustrations 29 a and 29 b, on pages 98 
and 99. Two pages of journal paper will be required. Rule an additional 
money column to the left, as shown in the illustrations. 

Optional Exercises 

A. It is suggested that the student prepare an inventory of his father's farm 
and bring it to the class for discussion. Special credit will be given for the work. 

B. On a form similar to the one used in lesson 36, prepare a statement of 
your father's farm for a convenient period. Ask your parents to help you. 

C. Draw a plot of your home farm and bring it to the class for discussion and 
credit. 

LESSON 38 
THE CASH BOOK 

The student is already familiar with the special column cash book. The 
same form is used as in lessons 3 and 4 with different headings. 

The several headings in illustration 30, pages 100 and 101, are self-explana- 
tory. Under Crop Receipts are entered sales of everything produced from the 
soil ; hides, hair, extra labor by the horses, as well as sale of animals are entered 
under Horses and Cattle ; while under Poultry are entered the sales of eggs, fowls, 
feathers, etc. Under Crop Payments are entered everything which directly 
increases the cost of crops, such as seeds, fertilizers, labor, etc. The same is 
true of Horses and Cattle, and Poultry. Real Estate includes the land, build- 
ings, fences, and all permanent improvements, but not repairs or replacements ; 
under Implements are included all new machinery and tools not previously 
included in the inventory, but not repairs or replacements ; parts of machinery 
are entered imder Repairs ; so are replacements of buckets, tools, etc., which 
were broken since the last inventory. The remaining columns need no ex- 
planation. 

All payments are made by check, the first number being 50. Ordinarily the 
bank book is balanced at the end of each month, but in this exercise it will be 
proved only twice during the year. 



CASH BOOK 103 

Cash Book, 1912-1913 

April 1 — Cash and in bank, $105; accounts and bills receivable, $20; sold 
2 horses @ $ 100 each to P. O. Williams. 
5 — Paid J. K. Gill Co., stationery, $3; desk, $50; paid E. M. 
Turner for INIare "Fannie," 3-yr., $200. 
20 — Paid Edw. Knowles for repair of implements, $3.20. 
30 — Sold 19 settings of eggs during April @ 2.00 ; paid E. F. Russel 
for breaking colts, $15; paid Farmers' Coop. ,chicken feed, $12. 
May 2 — Paid spraying outfit, $25 ; forge and tools, $ 15. 
9 — Sold calf, $ 25 ; garden truck, $ 18. 
16 — Sold old wagon, $ 35 ; paid Dr. E. Hancock, veterinary service, 

$5 ; paid J. R. Smith & Co., for 1 road wagon, $60. 
23 — Paid E. B. Brown, labor in garden, $ 15 ; drew for private use, $ 10. 
30 — Sold 36 settings of eggs during May @ $ 2. 
June 2 — Sold 1500 lb. strawberries @, 5 i to John Brown. 

9 — Paid Farmers' Coop, for 200 bu. corn for poultry @ 38 ^ bu. 
16 — Paid Farmers' Coop, for 20 bu. wheat @ 75 c5 for poultry ; paid 

Breeden Implement Co., parts for mower, $5.40. 
23 — Sold 1000 lb. strawberries @ 5 c^ to E. Horning. 
30 — Sold 12 settings of eggs during June @ $2 ; paid salary for April, 
May, and June, $ 150. 
July 5 — Sold 2-year colt to R. E. Evans, $ 150 ; sold 38 cockerels @ $ 1 .50. 
10 — Paid R. M. Jones for 2 calves @ $50; paid E. R. Travers for 

pasture, $20. 
15 — Sold 1450 lb. blackberries @ 5 ^. 

25 — Paid Edward Fulton for painting and papering dwelling, $100; 
paid Steiner Brothers for horseshoeing, $5. 
Aug. 4 — Sold 1 cow to Robert Johnson, $ 100 ; paid E. B. King for 1 heifer, 

$ 40 ; paid County Development League subscription, $ 10. 
Sept. 19 — Sold 1500 bu. potatoes @ 65 ^ to Farmers' Coop. 
30 — Salary for July, August, and September, $150. 
The student will now total all the columns and prove in the usual manner. 
He will also prepare a cash statement like the following : 



104 FARM ACCOUNTS 

Cash Statement, September 30, 1912 

receipts 
Balance on hand April 1 

Crops 

Horses and cattle 

Poultry 

Implements 

Total 



PAYMENTS 

Crops 

Horses and cattle 

Poultry 

Implements ' — 

General expenses 

Repairs 

Personal (above salary) 

Office desk 

Balance on hand — 

Total 

Balance 

George now checks up the bank pass book. He finds that all the canceled 
checks are returned except those in favor of E.Travers,Steiner Bros., and County 
Development League. The bank balance is $934.90. Is this correct ? 

The pass book is proved as follows : 

Our balance ? 

Check No. 05 ? 

Check No. 67 ? 

Check No. ()<S ? 

Bank balance $934.90 

Cash Book — Continued 

Oct. 1 —Paid on mortgage favor Farmers' Credit Assn., $400; paid inter- 
est on $1700 @ 5 per cent for 1 yr., $85. 
15 — Paid Roy Rudolph and Geo. Andrews for picking potatoes, $40. 
25 — Sold 500 bu. potatoes @ 65^. 



CASH BOOK 105 

Nov. 4 — Paid Chas. Heckert for remodeling dwelling, $400. 

10 — Drew for family service, SIOO. (The family has lived com- 

fortably on the monthly salary and the produce. According to 
agreement, this amount is now drawn to apply on the payment of 
a piano purchased to-day for $ 300. Drew for personal expenses* 
$25. Trip to Chicago to attend the National Agricultural 
Exhibit. This is really a legitimate expense, since the trip w^as 
taken in the interest of improved methods.) 

25 — Paid L. R. Steiner for repairing fences, $ 16. 

Dec. 5 — Paid Farmers' Coop., for 100 bu. corn @ 38^ for poultry. ' 

15 — Paid insurance premium for 3 yr., $24. 

26 — Paid H. K. Abraham for improvements on barn, $ 100. 

29 — Sold 2 yearling calves to E. K. Bryson @ $80. . 

30 — Subscription to Agricultural Magazines, $2.45 ; salary for October, 

November, and December, $150. 
Jan. 2 — Paid John Davis for 1 cow, $70. 

11 — - Paid A. K. Abraham, general repairs, $15. 
25 — Sold 2 heifers to Roy McDonald @ $75. 

Feb. 15 — Paid J. B. Kingdon for 20 lb. alfalfa seed @ 35 ^ ; 10 Ib.'clover seed 
@ 45 «f ; 60 bu. seed potatoes @ $ 1.50. 
28 — Sold 10 settings of eggs during February @ $1.50. 
Mar. 3 — Paid taxes for 1912, $ 45. 

16 — Sold 2-yr. old colt to John Edwards, $150 ; sold 1 cow to E. G. 

Strahorn (^ in 30 days, balance in cash), $100. 
30 — Sold 16 settings of eggs in March @ $1.50; membership dues 
State Breeders' i\.ssn., $5; salary for January, February, and 
March, $150. 
The student will now total all the columns and prove in the usual manner. 
Prove the pass book in the same manner as on October 1. The outstanding 
checks are : 

County Treasurer, and 
Salary for January, February, and March. 
Check the results with vour instructor. 



106 FARM ACCOUNTS 

LESSON 39 
THE FINANCIAL STATEMENT 

The Annual Statement consists of three parts : (1) A Summary of Cash Re- 
ceipts and Pa^'ments ; (2) A Statement of Resources and LiabiHties ; and (3) 
An Analysis and Summary of the Profits and Losses. 

Part (1) is taken directly from the columns in the cash book; part (2) is 
the inventories and other items making up the resources and liabilities ; and part 
(3) is made up of parts (1) and (2) combined. 

The statement is fully discussed in lessons 7 and 14. 

Written Exercise 

The student will now prepare the annual statement in the order indicated in 
the last paragraph. 

(1) Cash Statement. Same form as shown in illustration 29b, page 99. " 

(2) Resources and Liabilities. Insert the data given below in the third 
column, provided in the Continuous Statements Sheet. 

(3) The Analysis of Profits and Losses is prepared by filling out the form given 
below. 

Cash Statement, April 1, 1913 

receipts 

Balance on hand April 1, 1912 

Crops 

Horses and cattle 

Poultry 

Implements sold 

Total 

PAYMENTS 

Crops 

Horses and cattle — 

Poultry 

Real estate (improvements) 

Implements 

Int., ins., and taxes 



FINANCIAL STATEMENT 107 

General expenses 

Repairs 

Household (above salary) 

Personal (above salary) 

Office desk 

Bills payable — -, 

Balance on hand, cash ' 

Accounts receivable 

Total 

Financial Statement No. 3, Enterprise Farm 

April 1, 1913 
resources : 

40 acres land @ $210; 25 bu. potatoes @ 70^; 5 T. hay @ $8; 2 mares @ 
$200; 1 colt over 1 yr. @ $150; 2 colts under 1 year @ $75; 5 cows over 2 
years® $80; 2 heifers @ $75; 4 calves under 1 year @ $35; bull, $100; 
70 Plymouth Rock chickens @ $1; potato planter, $45; potato digger, $60; 
walking weeder, $11 ; 14-inch plow, $10; 2-section harrow, $8; wagon (old), 
$28; delivery wagon, $16; road wagon (new), $60; mower, $36; 2 hay rakes 
@$23; manure spreader, $ 80 ; platform scales, $ 14 ; cultivator, $ 13 ; tools, 
$9; harness, $20; buggy, $90; spraying outfit, $25; forge and tools, $15; 
cash and bank, $26.95; accounts and bills receivable, $50. 

liabilities : 

Mortgage favor Farmers' Coop. Credit Assn., due October 1, 1919, $ 1300. 

Summary 

Real estate 

Crops 

Horses and cattle 

Poultry 

Implements 

Office desk and safe 

Cash 

Accounts receivable 

Total 

Less liabilities — • 

Net worth 



108 ~ FARM ACCOUNTS 

Analysis of Profits and Losses 

CROPS cost returns 

Inventories 1912-1913 

Cash payments 

Cash receipts 

• Profit —. 

HORSES AND CATTLE 

Inventories 1912-1913 - . 

Payments 

Receipts 

Profit — — 

POULTRY 

Inventories 1912-1913 

Payments 

Receipts 

Profit 

IMPLEMENTS 



Inventories 1912-1913 

Payments 

Receipts 

Loss (depreciation) 



Summary of Profits and Losses 



LOSSES profits 

Crops 

Horses and cattle 

Poultry 

Implements 

Int., ins., and taxes 

General expenses 

Repairs 

Household (above salary) 

Personal (above salary) 

Net profit 

Total 
Rate of profit = N. P. ^ N. W. 1912 = --.--% 



FARM ACCOUNTS WITH PERSONS 



109 



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Proof 



Net worth as per inventory, 1913 
Net worth as per inventory, 1912 
Net profit '£ ! 



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LESSON 40 



FARM ACCOUNTS WITH PERSONS 

Farming may be regarded as a strictly cash business. The sales are com- 
paratively few and far between and the store accounts are usually settled at 
regular intervals. Exchanges of farm produce for merchandise should be re- 
garded as cash transactions ; the sale of produce for cash, and the purchase 
of merchandise for cash. This will insure the proper record in the cash book. 

It is true, however, that every farmer will have a limited number of personal 



110 FARM ACCOUNTS 

relations which require memorandum accounts. This is especially true of dairy- 
men, truck, and fruit farmers, whose customers may prefer to run an account by 
the month or week. In such cases, it is often convenient to use tickets or coupons 
of even amounts of 1 1, S 5, or $ 10, and sell them for cash at a small discount. 

Many short account systems for petty personal accounts are now in use, all 
having for their object the elimination of useless work in this class of accounts. 
One is the use of counter books, which give a carbon copy with each original. 
One slip is given to the customer and the other is kept as a temporary account. 
Since settlement is generally made once a month, it is useless to bring these 
personal accounts into the general books. Where such accounts are numerous 
at the time of inventory, their sum is usually regarded as a part of the inventory. 
But where they are few, such as in farming, they may as well be entered at once 
as cash and the due bill kept as a part of the cash balance. If only part payment 
is made, make a memorandum on the bill. When paid in full, the bill is either 
given the customer properly receipted, or destroyed. 

Where it is desired to keep a permanent record of accounts with persons, 
it is convenient to use an ordinary day book with journal ruling. The left 
column is used as the debit, and the right as the credit column, as shown in 
illustration 31, page 109. If such accounts are numerous, as in the retail fruit and 
dairy business, it is convenient to use a loose leaf book with journal ruling, 
provision having been made for giving a duplicate to the customer at the end of 
the month. 

It is wholly unnecessary to keep accounts with creditors. A bill should be 
required with each purchase and kept as memoranda until paid. Many mer- 
chants furnish each customer a pass book, which is a duplicate of their own 
account. 

Where the entry in the cash book is not made at the time of the 
transaction, it is important to remember that it must be entered at the 
time payments are made, crediting the proper enterprises in the usual 
manner. 

Below are four simple exercises which illustrate accounts with persons. 

Written Exercises 

On two pages of journal paper write up the following accounts and show the 
balance due, following illustration 31, page 109. 



FARM ACCOUNTS WITH PERSONS 111 

Stanley Murray 

August 1, 3 bu. apples @ 40^; August 4, 10 lb. honey @ 15^; August 5, 
1 qt. cream, 20^; August 6, 1 chicken, 60^; August 11, 2 bu. onions @ 80^; 
August 13, 1 qt. cream, 20jz5; August 17, 2 bu. peaches® 60^, 1 chicken, 55^; 
August 22, 2 lb. butter @ 30(^; August 27, 3 doz. eggs @ 20^; August 31, 
credited by cash, $5. Balance due, (?). 

Hyde Grocery Co. 

August 2, 10 bu. potatoes @ 60^ ; August 5, 8 lb. butter @ 30^ ; August 8 
10 chickens, 64#, @ 10^; By groceries as per bill on file, $9.55; August 11,30 
lb. honey @ 15^; August 15, 5 bu. onions @ 80^; August 19, 10 lb. butter («j 
30^ ; August 23, 5 boxes apples @ 90?^ ; August 25, 10 chickens, 50#, @ 10^ ; 
August 31, 6 lb. butter @ 30^ ; by cash $20. Balance due ( ?). 

Mrs. N. Brown 

September 1, Balance, $2.95; 1 chicken, 50^; September 2, 1 qt. cream, 
20^ ; September 4, 2 lb. honey @ 15^ ; September 5, 3 doz. eggs @ 35^ ; Sep- 
tember 11, 1| bu. potatoes @ 60^ ; 3 lb. butter @ 30^; September 15, 2 lb. 
honey @ 15^ ; September 19, 1 chicken, 65^ ; September 24, 2 doz. eggs @ 
35ff ; September 30, by cash, $8.45. Balance due ( ?). 

George Kinney 

The hired man, George Kinney, prefers to receive his pay as he needs it, and 
the proprietor is therefore keeping a memorandum account with him. Follow- 
ing is his account for the month of September : 

September 1, Balance due on wages for August, $25; September 3, cash 
$10; September 5, paid bill at Klines, $7.30; September 10, Cash, $5; 
September 26, pony, $25, saddle, $6; September 27, cash $5; September 30, 
wages for September, $35 ; October 1, balance due him ( ?). 



112 FARM ACCOUNTS 

LESSON 41 

EXERCISES IN FARM STATEMENTS 

Under the same headings as in the previous statements classify the following 
memoranda and then copy them neatly on journal paper : 

(A) Financial Statement, Jan. 1, 1912 

RESOURCES : 

514 A. land @ $60, including buildings and permanent improvements; 
400 bu. wheat @ 75^; 500 bu. oats @ 45^; 35 sk. vetch and oats @ $2.50; 
20 bu. wheat @ 40^; 40 T. loose hay @ $10; 10 bu. potatoes ©90^; 3 
grade cows @ $60; 2 registered cows @ $200; 3 grade heifers @ $50; 
2 registered heifers @ $100; 1 bull $50; 1 bull calf @ $25; 12 work horses 
@ $200; 2 two-year horses @ $150; 1 registered inare @ $500; 1 regis- 
tered 2-year filly, $500; 1 registered 7 mo. filly, $150; 3 brood sows 
@ $20; 75 grade sheep @ $4; 40 registered sheep @ $10; 100 fowls 
@$1; 10 geese @$1.50; 7 ducks @ 75^-; 5 hives bees @ $2.50; gasoline 
engine, $145; spring wagon, $50; wagon, $50; surrey, $50; buggy, $25; 
binder, $90; hay rake, $15; mower, $30; drill, $50; section harrow, $30; 
gang plow, $50; disk gang plow, $40; walking plow, $5; garden cultivator, 
$5; cream separator, $40; 4 sets harness, $120; tools, $50; supplies, wood, 
posts, etc., $125; accounts and bills receivable, $103.20; cash and bank, 
$76.40. 

LIABILITIES : 

Mortgage favor Farmers' Coop. Credit Association, 5 years @ 5 per cent, 
payable on or before Oct. 1, 1917, $7000; liired labor $125; due Farmers' 
Cooperative Exchange (on gasoline engine) $75. 

{B) Financial Statement, Jan. 1, 1913 

RESOURCES : 

514 A. land @ $60; improvements, $570; 300 bu. wheat @ 75^; lOOO 
bu. oats @ 45^; 30 sk. vetch and oats @ $2.50; 40 T. bailed hay (^ $9; 
40 T. loose hay @ $7; 25 bu. potatoes @ 80^; 3 grade cows ® $50; 3 
registered cows @ $200; 1 grade heifer, $25; 1 registered heifer, $75; 
1 bull, $75; 7 horses @ $250; 4 horses @ $100; 2 registered mares ( 



REVIEW^QUESTIONS 113 

1 registered 1-year mare, $200; 5 8-month colts @ $75; 2 brood sows @ $15; 
50 grade sheep @$4; 50 registered sheep @ $10; 4 rams @ $15; 100 fowls 
@ $1; 12 geese @ $1.50; 12 ducks @ 75(/:; 5 hives bees @ $2.50; gasoline 
engine, $130; wagon, $45; spring wagon, $45; surrey, $48; buggy, $20; 
binder, $81; hay rake, $13; mower, $27; drill, $40; 4-section harrow, 
$27; 1 gang-plow, $45; gang disk plow, $36; walking plow, $5; garden 
cultivator, $4; disk harrow, $50; manure spreader, $150; land roller, $55; 
potato planter, $62; cream separator, $36; harness, $200; tools, $55; sup- 
plies, wood, etc., $127; accounts and bills receivable, $78.80; cash and bank, 
$85.30. 

LIABILITIES : 

Mortgage favor Farmers' Coop. Credit Association, payable on or before 
October 1, 1916, $4000; hired labor, $140; due Huston Hardware Company, 
$73.40. 

(C) Prepare a continuous summary of (A) and (5). Submit your work for 
approval. 

LESSON 42 

REVIEW QUESTIONS 

On Farm Set I 

Note. — As paragraphs in the Farm Set I are not numbered, question num- 
bers do not refer to paragraphs. 

1 . Point out the advantages to the community of intensive farming. 

2. What is meant by a Farmers' Cooperative Credit Association ? (The 
school library should be provided with the U. S. Government Bulletins on this 
subject.) 

3. Ask your parents' opinion of the division of the labor in the different 
enterprises. 

4. Why should the household accounts be kept separate from the business 
accounts ? 

5. What implements do you think should be found on the Enterprise Farm 
to make it more efficient ? 

6. Compare the prices in the inventories with those prevailing in your 
locality and point out the differences. 

7. Explain the method of finding the profit or loss. 



114 FARM ACCOUNTS 

8. What is meant by depreciation ? By appreciation ? 

9. What advantage in giving George a percentage of the annual profits of 
the business for keeping the books ? 

10. What is the object of the continuous annual statement ? 

11. Explain the several headings in the farm cash book. 

12. What is included under Real Estate ? What under Repairs ? What 
under Implements ? 

13. How was the bank pass book proved ? 

14. Of what three parts does the annual financial statement consist, and 
how is each found ? 

15. Discuss the two methods for keeping farm accounts with persons. 

16. Why is it unnecessary to keep accounts with creditors ? 

17. What is the value of the farm plot ? 

18. Describe a method of duplicating it. 

19. What is a convenient scale to use ? 

20. Write a paragraph showing the importiance of keeping farm and personal 
accounts. (Suggestions will be found in the preface.) 

21. How does the rate of profit in the financial statement compare with the 
interest rates in your locality ? 

22. Do you regard the compensation of Mr. Enterprise and members of the 
family as satisfactory ? 

23. Besides the wages, what advantages does this family enjoy which they did 
not enjoy in the city ? 



FARM SET II 115 

LESSON 43 

FARM SET II 

These lessons illustrate a complete system of accounts for a modern general 
farm and furnish additional drill in the principles already studied. It includes 
not only complete financial records on the double entry principle, but also a 
system of cost accounts by which the farmer is able at any time to ascertain 
whether the business as a whole, or any branch of it, is paying or losing. The 
narrative is based on the operation of an up-to-date farm, but a number of 
transactions have been introduced which would, perhaps, not occur yearly, for 
the purpose of illustration. No records have been introduced which have not 
been tested and approved by a large number of successful farmers. 

The" books and forms used are : (1) The continuous inventory, (2) The 
special-column cash book, which serves both as cash book and general 
ledger, (3) the labor reports, (4) the feed record (or sheets), (5) cost ledger, 
(G) cost summaries, and (7) statements. 

The partnership has been introduced because under this arrangement it be- 
comes more natural to eliminate the household when considering the purely 
business end of the enterprise. It will also afford an opportunity for the student 
to study the laws of this important subject. 

The dates for the various operations, recorded in the cost accounts have been 
omitted, partly to save space and partly to give the students in different sections 
of the country an apportunity to do original work. 

It is, of course, impossible to give an exercise in which the crops and practices 
will be wholly familiar to the students or even to the teacher. This is rather an 
advantage than otherwise since it will often lead to inquiries which will be of 
value to the student. Regardless of these differences in details, the bookkeeping 
principles are the same everywhere. 

It is the experience of many who are using the system outlined in the follow 
ing exercise that if systematically carried out, it will not take the average farmer 
more than ten minutes per day to keep it up. But as in everything else worth 
while, success can be attained only by determined efforts and study. 



116 FARM ACCOUNTS 

THE PARTNERSHIP AGREEMENT 

Mr. H. M. Phillips owns a farm of 308 acres consisting of 246 acres of cul- 
tivated land, 50 acres of timber pasture, If acres of orchard and garden, 1| acres 
of yard, and 9 acres of roads and waste, as outlined in the diagram. Lesson 45. 
While the farm has been a successful one, he has come to the conclusion that 
better results can be obtained by taking in student as a partner and investing 
additional capital to improve the equipment. It is the plan to develop a model 
Dairy and Hog farm and to feed nearly all the crops, thus returning the fertility 
to the soil in the shape of manure. 

The partnership agreement is as follows : Student buys half interest in the 
business at a valuation to be placed upon the property by three impartial ap- 
praisers. Each partner is to receive a salary of $50 a month for personal 
services, and at the end of the year the profits and losses are to be shared equally. 
Mr. Phillips's family is to occupy the dwelling, and Student is to have use and 
care of a room in lieu of rent. It is agreed that each is to pay Mrs. Phillips $15 
per month for board, and in consideration of occasional services the household 
is to enjoy poultry and farm produce without cost to Mrs. Phillips. A strict 
accounting, however, is to be kept of the products used by the family for the 
purpose of showing the year's results. The household and family business, 
however, are to be kept strictly separate, Mrs. Phillips keeping the household 
accounts for her own information, according to the plan outlined in lesson 4. 

Mr. Phillips's specialty is farm crops, and Student's is dairying. Student, 
who is also a skilled bookkeeper, will have charge of the business end of the firm. 
It is decided to install a modern system of both financial and cost accounts. All 
moneys received are to be deposited in the local bank, and all payments are to 
be made by check. The firm name is to be Phillips and Student, and the details 
of the partnership agreement are set forth in Articles of Copartnership, dated 
January 1, 1912. 

Mr. H. M. Johnson, who has been in the employ of Mr. Phillips for some 
time, has been engaged for the year at a salary of $50 per month, without 
board, for which he will pay Mrs. Phillips $15 per month. 

The appraisers have handed in their report and the inventory is given below. 
Student settles privately for half of the net worth of the business, and each 
having signed the Articles of Copartnership, the year's partnership is begun. 



INVENTORY 117 

LESSON 44 
THE INVENTORY 

Of all business records, it is safe to say that the annual inventory is the 
most important and indispensable, if the business man wishes to know his fi- 
nancial standing. It is even possible, though far from desirable, to get along with- 
out any other records, and if the farmer finds no time for further bookkeeping, 
this one thing he must do : Take stock of his belongings at the end of every year. 
The total profit and loss may be ascertained without any further bookkeeping 
by merely taking the difference between the inventory at the beginning and 
end of the year. Thus, if the inventory January 1 of any year were $5000 
and on the same date the next year, with the same basis of valuation, and with 
due allowance for depreciation, the total is $5500, the net profit for the year 
is $500. The importance of proper books lies in being able to discover what 
enterprises are run at a profit and which ones, if any, at a loss. The inventory 
is often of great value in settling insurance claims, in probating estates, and in 
securing loans on satisfactory terms. 

What should be included in the inventory ? Everything of value on the farm 
from wagon grease to the automobile, providing it is used in the interest of the 
business. It should be noted that no household equipment should be in- 
cluded. Neither a washing machine nor a cook stove, though indispensable, 
are proper charges against the farm as a business enterprise. They would be 
equally necessary if the farm were sold and the proprietor moved to town. The 
case is different, however, with equipment kept for the farm hands in laborers' 
cottages and bunk houses. All such items should be included in the inventory. 
A mistake often made is that of charging the farm with extravagant buildings 
and equipment. The value of a comfortable dwelling, proportionate to the 
size of the farm, is all that should be charged. For instance, one often finds a 
dwelling worth $10000 on a few acres and the owner enjoys an automobile 
and other luxuries. Of course, all of this cannot be charged to the farm. In 
addition to the inventory proper, it is customary to include miscellaneous items 
of property, including cash, notes, stocks, etc., and also a statement of the 
liabilities. The difference between the total resources and the total liabilities 
is the present worth, and the difference between the worth of the business at 
the beginning and at the end of the year is the net profit, providing the pro- 
prietor has been paid for his labor. Or, it may be regarded as the family in- 
come when no regular wages are paid except for hired labor. 



118 FARM ACCOUNTS 

The question of how the inventory should be taken is important because it 
has a direct bearing on its accuracy. Perhaps the best plan is to head sheets of 
paper with the respective classes of property; one for buildings, another for 
Hve stock, a third for implements, and so on. Having determined the headings, 
pass through all the buildings and yards, listing, pricing, and checking. 

Having completed the rough draft and rechecked every item for accuracy, 
the slips are next arranged conveniently for copying in permanent form. Per- 
haps the most satisfactory form is the continuous arrangement shown in illus- 
tration 32, page 119. It saves time and insures accuracy, and it is also very 
convenient for reference. Any stationer can supply a 6, 12, or 24 column book, 
which may be used for the inventories, for the cash book, and for any other 
record requiring distribution. 

Whenever practicable, every business should be organized into departments 
for the purpose of placing responsibility and securing highest efficiency. The 
inventory should be taken by the head of each department and checked by 
another. In the exercises which follow Mr. Phillips has charge of the imple- 
ments, student of the stock equipment, and Mr. Johnson of the feed and sup- 
plies. 

The most convenient date for taking the inventory varies in different locali- 
ties. January 1st seems to be the natural date for final reckoning of the 
year's work, but any other date may be set as the beginning of the fiscal 
year. Except for the pressure of spring work, April 1st would be convenient 
in most localities, because supplies and feed are then low, and less time will be 
consumed in weighing and measuring. January 1st has been adopted in the 
exercises which follow. 

Written Exercise 

The student will now prepare the inventory in the continuous form as in illus- 
tration 32, page 119, from the report handed in by the appraisers referred to in 
this lesson. Ordinary journal paper will be used. You will need five pages. 
The first will be just sufficient for Real Estate and Products, page 2 will be de- 
voted to Stock, 3 and 4 to Implements, and 5 to Miscellaneous, Liabilities, and 
Summaries. Do not forward totals from one page to the next. Each division 
is totaled and brought into the summary. Head the second column 1913 in 
anticipation of inserting next year's inventory in that column, as shown in the 
illustration. Be sure to leave the remainder of page 2 for such new implements 
as will be purchased during the year. 



INVENTORY 



119 







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Illustration 32 



120 . FARM ACCOUNTS 

Inventory. Clover Leaf Dairy, January i, 191 2 

real estate : 

Farm $24875. 

Dwelling 2000. 

Laborer's cottage 500. 

Horse barn 1000. 

Dairy barn 1500. 

Hog house 200. 

5 colony houses 75. 

Sheep shed 50. 

Machine and tool shed 200. 

Manure and straw shed 300. 

Silo No. 1 100. 

Silo No. 2 150. 

Total real estate $30800. 

PRODUCTS : 

Wheat, 63 bu. @ $1 $ 63. 

Oats, 435 bu. @ 45^ 195.75 

Barley, 273 bu. @ 50^ 136.50 

Vetch, 17|T. @$10 . 175. 

Clover, 11 T. @$11 121. 

Corn ensilage (estimated) 73. 

Potatoes, 250 bu. @ 60^ 150. 

Fruit and vegetables 16. 

Wood and posts 162. 

Total products $1092.25 

No. 

HORSES : 

Brood mares (above 5 yr.) 6 $1200. 

Driving horses, 3 yr. 2 250. 

Colts 4 125. 

Total horses $1950. 

hogs: 

Boar 1 $ 35. 

Sows 10 200. 

Pigs 55 330. 

Total hogs $565. 



CATTLE : 

Bull 

Cows, average @ $60 
Heifers, average @ $25 
Calves, average @ $ 15 
Total cattle 

SHEEP : 

Graded Sheep, average @ ! 

POULTRY : 

Chickens, average @ 75^ 
Turkeys, average @ $2.50 
Ducks, average @ 85^ 
Geese, average @ $1.50 
Total poultry 
Total live stock 

IMPLEMENTS : 

Separator 

Babcock tester 

Milk cans 

Milk cart 

Hose 

Disk drill 

Land plaster sower 

Corn binder 

Corn planter 

Steel plow 

Walking plow 

Clod masher 

Sub soiler 

Disk cultivator 

Riding plow 

Mower 

Hay rakes 

Harrow 

Corn sheller 

Corn cultivator 

Harness 



INVENTORY 




1 


$150. 


24 


1440. 


8 


200. 


10 


150. 


88 


$320. 


200 


$150. 


5 


12.50 


5 


4.25 


3 


4.50 



121 



30 



150 



ft. 



30. 

20. 

8. 

55. 

10. 

100. 

8. 

8. 

3. 
13. 
35. 
30. 
40. 
36. 
10. 

8. 

25. 

175. 



.40 



$1940. 



171.25 



$4946.25 



122 



FARM ACCOUNTS 



Hatching equipment and brooders 




40. 


Poultry appliances 




20. 


Scales 


1 


15. 


Buggy 


1 


60. 


Wire stretcher 


1 


4. 


Stump puller 


1 


160. 


Wagon 


1 


35. 


Wagon 


1 


80. 


Wheel barrows 


2 


4. 


Double trees, etc. 




25. 


Grind-stone 


1 


3. 


Farm bell 


1 


3. 


Buckets, tubs, etc. 




10. 


Tools 




25. 


'" ' Total implements 






MISCELLANEOUS : 






Supplies : nails, twine, oil, etc. 




$25. 


cash and cash items, including bank 






balance, notes, and due bills 




250. 


Total miscellaneous 






LIABILITIES : 






Mortgage favor State School Fund (6 per cent) 


1 $8000. 


Interest due 




120. 


Unpaid labor 




45. 


Total liabilities 




$8165. 


Summary 






Real estate 




$30,800. 


Products 




1,092.25 


Live stock 




4,946.25 


Implements 




1,236. 


Miscellaneous 




275.80 


Total resources 




$38,350.30 


Total liabilities 




8,165. 


Net worth 




$30,185.30 



$1236. 



$275.80 



INVENTORY 123 

LESSON 45 

THE FARM PLOT 

This farm is of very irregular shape, being bounded on the southeast by 
the river and on the northwest by the foothills. It is, therefore, very difficult to 
plot to scale. Nor is this necessary when the object is merely to preserve a 
record of the crop rotation. It is desirable, however, to take some pains with 
the first outline, since subsequent plots can be reproduced by tracing the first over 
carbon paper. Several copies can be obtained in this manner at the same time. 

Written Exercise 

In your textbook draw a rectangle, embracing the plot, illustration 33, page 
124. Divide the sides of the rectangle into four equal parts, and join the oppo- 
site points by faint pencil lines. On a sheet of paper draw a rectangle with 
double the length of sides of the figure. Divide the sides into four equal parts 
and join the points. You are now able to reproduce the figure in the book very 
closely by noting the points where the field boundaries intersect with the field 
lines. It will give you a plot four times the size of the illustration. First mark 
the points and then join them with light pencil lines. When you find the figure 
satisfactory trace it in ink. Practice lettering on a separate sheet until your 
work is something like the illustration. 

Note that the principal fields are numbered, and when the field is devoted to 
more than one crop, the patches are numbered 3a, 36, etc. 

As suggested on page 98, a convenient scale to use in plotting land is an inch 
to a certain number of chains, rods, or feet. It is not necessary to give rules in 
mensuration here. They are found in any good arithmetic. Here is a table, 
however, which will be useful in plotting your farm. One acre is equal to 10 
•rods by 16 rods, or 8 by 20, or 5 by 32, or 4 by 40; in fact, the length of two 
adjacent sides of the rectangle may be any two factors of 160 rods. It is often 
interesting to designate each crop by different colors. The diagram should be 
sufficiently large to give space on each plot for crop rotation, yield, and other 
data of interest. 



124 



FARM ACCOUNTS 
N 




14. © ORCHARD.. @ DWELLING AND YARD. Q) BARNS i ETC. 

Illustration 33 

Optional Exercise 

Prepare a diagram of your home farm, using the exact survey as shown on 
the abstract of title. You will find it exceptionally interesting to study the 
abstract and the several legal questions connected with it. 



FARM PLOT 125 

LESSON 46 
THE CASH BOOK — LEDGER 

Farming may be regarded as a cash business so far as bookkeeping is con- 
cerned. Since the year is the unit of bookkeeping, in the large majority of 
cases it is possible to "wind up" all petty accounts before the end of the fiscal 
year and thus have all the business brought into the cash book. 

Wherever possible, purchases should be made for cash or exchanged for farm 
products, which amounts to the same thing. If accounts are carried, the bills 
are settled monthly, or at other regular intervals. It is preferable to pay for 
definite items rather than so much on account. For instance, suppose a bill 
for items A, B, C, D, and E is due amounting to $25.40, and only $15 can be 
paid. It is found that A, B, and C amount to $ 13.20. It is preferable, so far as 
the farmer is concerned, to pay only for the three items rather than to pay $15 
on account, since the several items may be chargeable to different accounts, and 
splitting an item often causes trouble in the bookkeeping. It is generally 
unnecessary to keep accounts with the dealers. The bills and some suitable mem- 
oranda are quite sufficient. All outstanding accounts should be paid at the 
end of the fiscal year so as to insure the proper charges. If this is not done, the 
outstanding bills may be classified in the same manner as the cash payments and 
charged to the several accounts. The total of the outstanding bills would be 
classed as Accounts Payable. 

It is customary for wholesale houses to sell goods on time subject to certain 
terms. Thus, they often give 5 per cent off if the bill is paid within ten days, or 
perhaps 2 per cent, if paid in thirty days, and net if not paid within thirty days, 
up to sixty days. This is wTitten, Terms : 5/10, 2/30, n/60. Business men gen- 
erally have come to realize the importance of discounting bills, even if it requires 
occasional small loans at the bank. Merchants are usually willing to give a 
discount for cash far in excess of the interest charged at the bank for the same 
amount. For example, suppose it is desired to buy a piece of machinery in June 
which costs $50. The merchant will doubtless be willing to give at least 
5 per cent off for cash, which amounts to $2.50. The interest for ninety days on 
$50 at 6 per cent is only 75^, a saving on this item alone of $1.75 besides the 
improved credit. It is the dollar saved as well as the dollar earned which swells 
the annual profit and means success instead of failure. Paid bills are filed away 
for reference, as suggested on page 129. The number of the check should be 
noted on the bill and also the distribution. See illustration 19, page 80. 



126 



FARM ACCOUNTS 



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Illustration 34 

All receipts are deposited and all payments are made by check. Thus, when 
all the checks are paid by the bank, the pass book agrees with the cash book. 
Petty items are paid by the partners out of private money and they are reim- 
bursed by check at convenient intervals. 

It is very important that the cash be balanced at least once a month. This 
should be done when the bank returns the canceled checks. The form of 
noting the balance is shown on page 104. The bank pass book is proved by the 
cash book balance as follows : To the cash book balance add the outstanding 
checks : The sum is equal to the pass book balance. 

If no regular vouchers are kept, all the items should be entered. If vouchers 
are kept, only the name of the payee, or the number of the duplicate sales 
slip need be entered. The one methcd is illustrated on the receipt side, above 
and the other on the payments side, page 127. 

If sales are made on time, it is understood that payment will be made before 
the end of the year, and a memorandum accoimt should be kept, entering the 
payment when it is made. 

The headings of the distribution columns in the cash book are for the most 



CASH BOOK 



127 



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Illustration 34 

part self-explanatory. In practice they may be varied to suit the conditions of 
any farm. In the exercise, every sale, or other receipt coming in from the farm 
crops, is entered in that column. In the Farm Crops are included grain, ha}', 
and potatoes, while under Orchard and Garden are entered fruits, vegetables, 
including onions. Since dairying is inseparably connected with Live Stock, 
these two titles are united, and in this column are entered all sales of cattle and 
dairy products, including milk, cream, cheese, and so on. Horses, Sheep, Hogs 
and Poultry require no explanation. In the Sundry column are entered all 
items which cannot properly be placed in the other columns. On the payments 
side crops are debited with all purchases intended directly for the use of crops, 
including seed, fertilizers, boxes and packing, twine, threshing, etc. Under 
Live Stock are entered all direct charges against animals on the farm, including 
Poultry. Fees in the Cow Testing Association, horseshoeing, veterinary 
services and the like are proper charges to Live Stock. All labor is entered in 
the Labor column even though it is known to be applied directly to any partic- 
ular enterprise, since in the cost accounts labor is distributed at the uniform rate 
of 20 cents per hour. If practicable, labor may be apportioned at the time of 
paying the wages into the various enterprises. Under Implements is entered 



128 



FARM ACCOUNTS 



all purchases of new machinery, tools, etc., but not when the article is intended 
to replace one that has been previously inventoried. Under Improvements are 
entered all outlays which add permanent value to the property, such as buildings, 
new fences, etc. Under Repairs are entered all payments which are made for 
the maintenance or upkeep of the property, such as nails, lumber, and other 
material bought for use in repairing. In the General Expense column are 
entered all outlays which cannot properly be charged against definite enterprises, 
but which are a loss to the business. In the Sundries columns are entered all 
items which do not fall under the other columns. 

It is generally preferable to forward the totals from page to page until the 
end of the year rather than to close each month and carry forward the balance 
only. 

Because of the limited space and because some classes of transactions have 
very few entries, certain columns frequently contain more than one class of 
entries. For instance, in the receipts, all the farm crops are grouped together, 
orchard and garden, and so on. If it is desired to classify them separately, it 
is only necessary to run through the columns and pick out the items under each 
heading. The total of the several headings, of course, equals the total of the 
columns. 

One of the most satisfactory methods of filing vouchers is in envelopes 
properly numbered to correspond with the numbers of the checks, as follows : 




Illustration 36 



A No. 10 Manila envelope is recommended. For convenience of ref- 
erence each envelope contains 10 vouchers, beginning 1, 11, 21, 31, etc. The 
bills are filed as they are paid with the check number marked on it, and when 



CASH BOOK 129 

the canceled checks are returned, thej^ are attached to and filed with the cor- 
responding bills. Index cards may be made as desired and kept either in the 
front or back of the envelopes. 

It is now quite customary to note on the check briefly the items paid, or at 
least the date or number of the bill. This is usually done in the lower left-hand 
corner or immediately under the amount in writing A check on which is 
provided a regular space for this purpose, and sometimes also for the distribu- 
tion of the payments is called a voucher check. Such a check is usually regarded 
as a sufficient receipt. Any large business should provide itself with these 
checks. 

No household expenses whatever are included in the cash payments. All 
private payments are made out of the monthly wages, and, if desired, each 
partner can keep his private accounts on a form similar to the one illustrated 
on page 000. If it becomes necessary to advance more than the monthly wages 
to either partner, a separate check is written and the amount is extended in the 
Sundries, and not in the Labor, column. 

Written Exercise 

Below are the cash receipts and payments for the year. The student will 
enter them on the blank corresponding to illustration 34, pages 126 and 127. 
Note that the first few entries correspond with the illustration. The use of 
the columns is fully explained above. The work is to be balanced and proved 
each month. 

January, 1912 

receipts : 

1. Balance on hand, $250.80 (Do not fail to enter in both the total and the 

sundries columns.) 
5. Farmers' Cooperative Association 
100 # chickens (q) 15^. 
15. Benton Produce Co. 

81,500 # potatoes @ 1 ^. 
15. E. R. Lawrence paid interest $ 4. 
15. Cooperative Creamery 

510 # butter fat @ 35 ^. 
27. Farmers' Cooperative Association 
185 doz. eggs @ 45 ^. 



130 



FARM ACCOUNTS 



PAYMENTS : 

2. Check 1. 
2. 2. 

5. 3. 



8. 



Independent Telephone Co, 

Service for January, February, and March, 
F. M. Johnson 

Wages due for December 
R. M. Wade & Co., Hardware 
Fence wire 
Lumber 
Nails 
Bolts 
Manure spreader 

(All the supplies are for repairs. Hence 
Implements, $ 150 ; Repairs, $ 70.45.) 
H. M. Phillips 

Attendance Farmers' Week at State College 
(This trip was taken in the interest of the 
business to learn new methods. Hence 
it is charged to General Expense.) 
Incidental expense items as follows : 
Cash book 
Time books 
Journal for cost accts. 
Manila envelopes for voucher file 
Blank paper for special records 
Miscellaneous 
Stationery 

(These items were paid for by Mr. Phil- 
lips personally and he is now reim- 
bursed out of the partnership funds. 
This practice enables the firm to pay 
all bills by check. His personal mem- 
orandum is filed with check number 4, 
the same as any other bill. In large 
establishments it is customary to ad- 
vance a certain amount for petty cash 
items, but here this is unnecessary.) 



$3.50. 

$45. 

$25.30 
42. 
2.40 
.75 
150. 



$25. 



2. 



.50 



1, 



.50 

.25 

.75 



$5. 



$30. 



CASH BOOK 131 

15. 5. E. K. Abraham 

Improvements to dairy barn, as per con- 
tract and specifications $221. 
24. 6. J. R. Smith & Co. 

Gasoline engine 145. 

24. 7. Cow-Testing Association 

Quarterly dues (live stock.) 3. 

31. 8-10. Salaries, Phillips, Student, Johnson, each 
$50. (Salaries will be paid regularly 
every month.) 150. 

February 

receipts : 

10. Farmers' Cooperative Association 
100 # geese @ 20 ^. 

20. Deering Construction Co. 

35 days' team hire @ $ 2 

21. Cooperative Creamery 

540 § butter fat @ 35 i. 
21. Farmers' Cooperative Association 
235 doz. eggs @ 40 i. 

PAYMENTS : 

1, Check 11. Dunn Bros. Lumber Co. 

Material for repairs to dwelling $42.30 

4. 12. Corvallis Lumber Co. 

4 M shingles ((^^ $2.50 

(For repair of dwelling roof.) 
10. 13. R. H. Huston 

Fork handle $ .30 

Nails 2.40 

3 Pitchforks @ 60 ^ 1.80 

. Part for mower 1.30 

Wagon pole 6. 

(Repairs and replacements.) 

25. 14. Springer & Hunter, Plumbers, 

Installation of water system $ 260. 



132 FARM ACCOUNTS 

28. 15-17. Salaries 

28. 18. Henkle Saddlery Co. 

1 set harness $30. 

You will now total all the columns. Add the totals of the distribution 
columns on the receipt side and see that the sum equals the total receipts. 
Do the same with the payments. 

Then find the cash balance. Write the balance on the next line below the 
last entry on the receipt side, writing the balance in the items column, as 
shown on page 126. 

March 

receipts : 

2. Farmers' Cooperative Association 

50 # chickens @ 15 ^. 
11. J. R. Brown 

2 sheep @ $ 5. 

25. Farmers' Cooperative Association 

285 doz. eggs at 25 i. 

26. Farmer's Cooperative Creamery 

600 # butter fat @ 30 ^. 
28. John Henderson 

1 colt, 20 months, $115. 



1. 


LNTS: 

Check 19. 


Century Newspaper Agency 

World's Work, Country Gentleman, 








Breeder's Gazette 


$ 5. 


4. 


20. 


Edward Hunter 








Repairing well 


10. 


30. 


21. 


H. M. Phillips 
Attendance at State Breeder's Associa- 








tion 


5.30 






Postage 


1. 






Salary 


50. 






(General Expense, $6.30, Salary, 








$50.) 







CASH BOOK 




22-23. 


Salaries, Student and Johnson 




24. 


Portland Seed Co. 






Rye seed 


$12.25 




Vetch seed 


63. 




Clover seed 


31.20 




Rape seed 


$2.55 




Kale seed 


o 
o. 




Seed peas 


28.60 




Seeds, plants, etc. 


4.40 




Seed corn 


2.70 




(Crops.) 






April 




RECEIPTS : 







133 



1. Henry Sullivan 

80 lambs @ $ 3. 
15. Robert C. Richards 

2 colts @ $ 130, two years old. 
20. Stromberg Bros. 

8 heifers @ $ 25. 
30. Cooperative Creamery 

610 # butter fat @2bi. 
Farmers' Cooperative Association 

260 doz. eggs @ 20 i. 

PAYMENTS : 

1. Check 25. County Treasurer 

Taxes, 1912 $205. 

(General Expense.) 
1. 26. State Treasurer 

Int. on $ 8000 for 6 mo. @ 6 per cent 
(General Expense.) 
1. 27. Independent Telephone Co. 

Service for April, May, and June 3.50 

5. 28. Tinker Bros. 

Horseshoeing 5. 

(Charge to Live Stock since it is charged 
to horses in the cost accounts.. 



134 FARM ACCOUNTS 

16. 29. Hout & Whiteside 

Halter 1.50 

Pails .80 

Milk cans 2. 

(To replace broken ones.) 

30. 30-32. Salaries 

33. Hector M. HoUis 

Breaking colts 90. 

. (Live Stock) 

34. Dr. Horace Morell, Veterinarian, 

Treatment of horses 15. 

(Live Stock) 

35. R. M. Wade & Co. 

Potato Planter 62. 

36. Cow Testing Association 

Quarterly dues 3. 

Find the cash balance. The bank has returned the pass book and the can- 
celed checks. All are returned except numbers 7, 17, and 20. It shows a 
balance of $ 525.25. Prove the correctness, as follows : 

Our balance 

Check 7 

17 

20 

Bank Balance 

Is the balance correct ? Place a check mark at the left of all the numbers 
except 7, 17, and 20. In practice this should be done every month. The 
canceled checks are now filed either in numerical order or with the vouchers in 
their respective envelopes. 



May 



RECEIPTS : 

3. Edward C. Green 
4 calves @ $ 10. 
10. Edward Horner 

Garden truck $ 12. 
20. John Winkle 

10 M # hogs ®7 i 



CASH BOOK 



135 



26. 


Cooperative Creamery 
590 # butter fat @ 25 ^ 




30. 


Farmers' Cooperative Association 


. 




235 doz, 


, eggs @ 20 )/5 




PAYMENTS : 






4. 


Check 37. 


E. K. Russell 








Labor, repairing, tiling 


$ 10.20 


li 


38. 


E. H. Friedolf 

Wages for General Assistance in Spring 








work 


20. 


16. 


39. 


Geo. Rudolf 








Wages for general assistance 


16.40 


2H. 


40. 


J. B. Pilkington 








Land plaster 


11. 






Spraying material 


5.40 






Rose cuttings 


.75 


31. 


41-43. 


Salaries 

(Add $ 1 to Philips' check for stamps.) 




31. 


44. 


R. H. Huston 








Lawn mower 
Surrey 


12. 
150. 



June 

receipts : 

8. Kline Bros. 

640 # Wool @ 20 ^ 

20. Johnson & Hunter 

Garden truck $ 20 

21. Hotel Julian 

500 / strawberries ® 5 ^ 
26. Cooperative Creamery 

500 # butter fat at 25 ^. 
29. Farmers' Cooperative Association 

210 doz. eggs @ 25 ^ 

PAYMENTS : 

1. Check 45. Benton County Growers' Association 
Bonds 



$20. 



136 FARM ACCOUNTS 



5. 


46. 


Edward Holgate 
•Shearing 80 sheep @ 10 ^ 




8. 


24. 


47. 


J. R. Smith & Co. 
Sheep shears 
Spraying outfit 


$7. 
10. 




24. 


48. 


R. H. Huston 
1 Hay loader 
1 Hay rake 
1 Harpoon hay fork 
1 Hay sling 
1 Unloader 


90. 
75. 

2. 

4.50 
15. 




30. 


49-51. 


Salaries 






The bank has returned the pass book. Checks 41, 45, and 46 


are out 


standing. 


What should be the bank balance ? 







CASH BOOK 137 

LESSON 47 
CASH BOOK — LEDGER, Continued 

Prepare a cash statement for the first six months (see form, lesson 38) and 
submit it to your teacher for approvaL Then complete the entries for the year. 

July 

receipts : 

3. City Livery 

1 load clover hay $ 7.90 
20. Edward Horning 

Garden truck $ 1 1 
22. Hotel Julian 

Milk and cream $ 3 
26. Cooperative Creamery 

450 # butter fat at 25 ^. 
3L Farmers' Cooperative Association 

195 doz. eggs @ 25 ^. 
31. City Stable 

1 load vetch $ 9.80 

PAYMENTS : 

1. Check 52. Independent Telephone Co. 

Service for July, August, September $ 3.50 

. 15. 53. Fred Buchanan 

BaHng 15 T vetch @ $ 2 
Baling 10 T. clover @ $ 2 ' 

15. 54. Cow-Testing Association ' 

Quarterly dues 3. 

16. 55. Farmers' Cooperative Association 

Twine $ 33.55 

Paper 2.20 

26. 56. R. M. Wade & Co. 

McCormick binder ■ 150. 

31. 57-59. Salaries 



138 FARM ACCOUNTS 

August 
receipts : 

5. Johnson & Hunter 

Garden truck $ 11.20 
19. Farmers' Cooperative Association 
100 # ducks @ 20 ^ 

19. Benton Produce Co, 

63 T. vetch hay @ $ 10 

20. Johnson & Hunter 

400 # blackberries @ 5 ^ 
27. Cooperative Creamery 

500 # butter fat @ 30 ^ 

30. Farmers' Cooperative Association 

160 doz. eggs @ 30^ 

PAYMENTS : 

5. Check 60. Philip Bates, Threshing 
300 bu. wheat @ 6 ^ 
3120 bu. oats @4:^ 
1155 bu. barley @ 5 ^ 
16. 61. Farmers' Cooperative Association 

82 sacks @ 10 f^ 
800 sacks @ 5 i (seconds) 

31. 62. H. M. PhilHps 

Expenses at State Fair $ 15.40 

Salary 50. 

31. 63-64. Salaries, Student and Johnson 

31. 65. E. H. Friedolf 

General labor 23.40 



September 



RECEIPTS : 

1. City Stable 

32 T. clover @ $11 

2. City School Board 

50 Cord wood @ $4 



CASH BOOK 139 

10. Farmers' Cooperative Association 

100 # ducks @ 20 ^. 
18. E. K. Sharp 

2 sacks barley, $ 1.60 
20. Hotel Julian 

Milk and cream, % 2. 
27. Cooperative Creamery 

640 # butter fat @ 30 ^. 
27. Farmers' Cooperative Association 

85 doz. eggs @ 35 ^. 

PAYMENTS : 

5. Check 66. Tinker Bros. 

Horseshoeing $ 5. 

25. 67. Benton Lumber Co. 

Boxes and crates 28.70 

27. 68. Edward G. Dryer 

Engine, rented for cutting silage $ 11.20 

Gasoline, for same 3.50 

30. 69. R. H. Huston 

Seed cleaner 35. 

Potato digger 126. 

30. 70-72. Salaries 

October 

receipts 

5. Winkle Elevator Co. 

2120 bu. oats @ 45 ^. 
10. John Winkle 

150 M # hogs ®7 i 
16. Fisher Mills 

164 bu. wheat @ $ 1 

20. Winkle Elevator Co. 

134 bu. barley @ 50 ^ 

21. Farmers' Cooperative Association 

100 boxes apples @ $ 1 
44 boxes pears @ $ 1.20 



140 FARM ACCOUNTS 

25. Geo. Schneider 

4 calves @ S 15 

29. Cooperative Creamery 

650 # butter fat @ 30 f^ 

30. Farmers' Cooperative Association 

45 doz. eggs @ 40 ^ 

PAYMENTS : 

2. Check 73. Cow-Testing Association 

Quarterly dues $ 3. 

2. 74. State Treasurer 

Int. on S 8000 for 6 mo. @ 6 per cent 

2. 75. Independent Telephone Co. 

Services for October, November, and December 3.50 

31. 76-78. Salaries 

November 

receipts : 

12. Farmers' Cooperative Association 
63 sacks onions @ $ 1.25 
160 # turkeys @ 20 ^ 

26. Cooperative Creamery 

550 # butter fat @ 35 j^ 

29. Farmers' Cooperative Association 

60 doz. eggs @ 45 ^ 

PAYMENTS : 

3. Check 79. R. M. Wade & Co. 

Complete tool kit $ 25. 

6. 80. J.K.^GillCo. 

Account book $ .50 

Billheads 1. 

Receipt book ' .25 

Letterheads 3. 

Envelopes 1.50 

30. 81-83. Salaries 



CASH BOOK 141 

December 



RECEIPTS : 

2. Deering Construction Co. 

25 days' team labor^ @ $ 2 
7. W. S. Brown 

108 posts @ 25 ff 
19. Farmers' Cooperative Association 

200 # turkeys @ 20 ^ 
27. Cooperative Creamery 

500 # butter fat © 35 f^ 
30. Hotel Julian 

Milk and cream, $ 3.60 
30. Farmers' Cooperative Association 
110 doz. eggs @ 50 ^ • 



lYMI 

3. 


LNTS: 

Check 84. 


State Treasurer 

Payment of $4000 on mortgage and 2 
mo. interest on S8000, SSO. New 
mortgage payable on or before De- 
cember 1, 1917 


5. 


85. 


Tinker Bros. 
Horseshoeing 


16. 


86. 


Dr. Morell 

Veterinary fees, tuberculosis test 


31. 


87-89. 


Salaries 


31. 


90. 


J. R. Smith Co. 

Litter carrier installed $ 50. 
Oil .50 
Gasoline 1. 


31. 


91. 


E. K. Abraham 

For building silo No. 2 



150. 



142 FARM ACCOUNTS 

LESSON 48 
VALUATION AND DEPRECIATION 

In connection with the annual inventory, two very important questions arise, 
namely : What value shall be placed on the property ? and, What allowance shall 
be made for the natural "wear and tear" ? 

The actual value of any business depends ultimately on its earning capacity. 
If land can be relied upon to earn $ 6 an acre a year besides compensation for 
labor, depreciation, and risk, and 6 per cent is the current rate of interest, it is 
worth $ 100 an acre. However, this is not ordinarily a practicable way of 
arriving at land values, because few farmers know what profit their land returns 
per acre. When the farmers keep accurate records, this will, probably, be the 
most satisfactory basis for land valuation. 

Sentiment is sometimes allowed to influence the valuation, since the home- 
stead is worth more to the original settler than to any subsequent owner. This 
should not be encouraged. The taxable value, or any proportion based on it, 
is likely to prove unreliable because of the variety of tax rates even in adjoining 
counties. Perhaps the best valuation is a rather conservative estimate at 
what the land would bring if it were to be sold in the open market. This can 
usually be ascertained with fair accuracy, since there are in every community 
frequent sales of land situated similarly to the farm in question. Under any 
circumstances, it is preferable to undervalue rather than to overvalue. 

Stock and farm produce should be valued at current market prices, while 
implements and tools should be valued at cost less due allowance for depreciation. 

Depreciation may be defined as the decrease in value which property under- 
goes (1) through use, (2) becoming out of date, (3) being places in a less favorable 
position than formerly, and (4) through abuse. Often a business becomes embar- 
rassed because large profits have been declared while the plant has gone to ruin, 
and after a few years it finds itself with depleted equipment and no fund set apart 
with which to replace it. To guard against this, the Interstate Commerce Com- 
mission now requires that all concerns under its jurisdiction shall set aside a certain 
percentageof their earnings for replacement of equipment. The farmer is, of course, 
less responsible to the public for failure to exercise prudence in this respect, but 
he is generally most successful who follows sound business practice in this matter. 

Even with the best of care a mower will last only ten or fifteen years. If it 
lasts ten years, and costs $ 50 new, $ 5 is the annual loss due to depreciation 



VALUATION AND DEPRECIATION 143 

If a house lasts 50 years, 2 per cent is lost each year. In each case the loss is 
as much an expense against the year's business as wages, insurance, or interest. 

But depreciation is often the result of new inventions more than of actual 
wear. For instance, the man who had just purchased an old-style reaper 
about the time the self-binder appeared, lost nearly 100 per cent in one year 
because he could not afford to use the old implement in competition with the new. 
Fortunately, the farmer is less affected by depreciation due to property being 
out of style, though he is by no means free from it. This is most noticeable in 
harness, vehicles, and the like. If a railroad should pass through the farm in 
such a manner as seriously to interfere with farming operations, and if local 
markets should decline, or if there should be an unfavorable change in population 
or local institutions, the farm may depreciate in value. And, finally, a farm 
often depreciates in value by the abuse of the soil in continuous cropping, im- 
proper cultivation, lack of fertilization, and so on. 

There are four practical methods of computing depreciation : 

1. To list all property at proper prices and deduct a uniform rate of deprecia- 
tion, according to the several classes of property. 

2. To apply a uniform rate of depreciation on a continually decreasing 
valuation. For example, 10 per cent on $100 this year, 10 per cent on $90 
next, 10 per cent on $ 81 next, and so on. 

3. To revalue each article annually. 

4. To charge all replacements to expense or repairs and in this manner 
maintain the original valuation. 

A combination of all four methods has been used in the exercise in this lesson. 
In the first place, real estate is not reduced to show the decrease in building 
values. The appreciation in the value of the land, due to improved methods of 
farming, together with good care and repairs, will more than offset the decrease 
in the value of the buildings. 

It is found impracticable to fix a satisfactory rate of depreciation for the 
live stock, since some are increasing and others are decreasing in value. Hence, 
all the animals are revalued at each inventory. The live stock cost accounts 
are charged with 6 per cent on the valuation of the houses devoted to the different 
kinds of animals, together with a suitable depreciation for the implements 
used in that enterprise. For instance, the dairy equipment is "charged off" 
at the rate of 20 per cent, since it will probably have to be replaced within 
five years. 



144 FARM ACCOUNTS 

The case of implements is different. From a careful estimate of the "life" 
of the various implements it appears that an average of ten years will not be far 
wrong. That is, the total value of the implements at the beginning of 1912, 
$1236, will have to be replaced in ten years and hence $123.60 is "charged off" 
each year. This happens to be almost exactly 50^ per acre of the cultivated 
land. Since every acre will probably receive about an equal use of the imple- 
ments, the crops are charged with the depreciation at the rate of 50^ per acre. 
Next year it will be $ 225, or 10 per cent on the total implements at the beginning 
of 1913. This will be about 65^ per acre. 

Depreciation is one of the most debated subjects in accounting literature. 
This is perfectly natural. Even with the same care, the same grade of machine 
or horse or house, will rarely last the same length of time in two localities. 
This is due to climatic and other natural conditions "over which man has no 
control." Hence, there can be no such thing as standard rates of depreciation. 
Attempts have been made in this direction, but all have failed. Fortunately, 
however, the law of averages comes to our assistance. Where some implements 
are short lived, others last longer, and by taking a sufficiently long period and a 
sufRciently large number of articles, it is generally possible to arrive at a rate 
which answers for all practical purposes. 

If it is desired to adopt a uniform rate of depreciation, the following table 
may serve as a guide : 

Frame buildings 2 to 5 per cent. 

Brick buildings 1 to 3 per cent. 

Horses, above 5 years 10 per cent. 

Milch cows, after 3d yr. 8 per cent. 

Machinery and tools 6 to 10 per cent. 

The thoughtful farmer will find no difficulty in adjusting these rates to suit 
his own conditions. 

It will be found advisable to re-check the accuracy of the adopted rate of 
depreciation by making a complete revaluation every five or six years, or at 
any time when it is suspected that the rate is too inaccurate. 



VALUATION AND DEPRECIATION 145 

Written Exercise 
Inventory, January 1, 1913 

You will now record the annual inventory from the data given below. 
Review paragraphs on inventory in lesson 44, and also bear in mind the discus- 
sion on depreciation and valuation in this lesson. You will merely extend the 
amounts in the second column in the continuous inventory, which you provided 
in lesson 44, and add the improvements and implements recorded in the cash 
payments. There is only one other item to include, that of the County Grow- 
ers' Stock, which is considered worth its cost. There is one due bill from Mr. 
Brown which was entered as cash, and is, therefore, included in the cash balance. 

Real Estate. These items are the same as they were January, 1912, 
with the addition of improvements including silo No. 2, as shown in the cash 
book. 

Products. Wheat„60 bu. at $1 ; oats, 406 bu. at 45^?^ ; barley, 222 bu. at 
50^; vetch, 22§ T. at $10; clover, 22 T. at $11; corn ensilage (estimated), 
$189; potatoes, 350 bu. at 60^; fruit and vegetables, $66; artichokes, $175; 
kale, $50 ; wood and posts, $205. 

Live Stock. Horses: Brood mares, above 5 yr., 6, $1100; driving horses, 
3 yr., 2, $275 ; colts, 5, $650. 

Hogs: Boar, 1, $30; sows, 12, $220; pigs, 50, $300. 

Cattle: Bull, 1, $175; cows, 25, $1500; heifers, 9, $225, calves, 12, $180. 

Graded Sheep : 77, $308. 

Poultry: Chickens, 210, $157.50; turkeys, 7, $17.50; ducks, 5, $4.25; 
geese, 3, $4.50. 

Implements : All items the same as January, 1912, with the additional im- 
plements purchased, as shown in the cash book. Note that tools and har- 
ness are added to by purchases during the year. All items are inventoried at 
cost, except those inventoried the previous year, which have depreciated 10%. 
From the total of implements as shown in the 1913 column deduct 10% of the 
total implements shown in the January, 1912, column, and the remainder will be 
the implements inventory January, 1913. 

Miscellaneous. Supplies : nails, twine, oil, etc., $32 ; County Growers' 
Association stock, $20 ; cash and cash items, including bank balance, notes, and 
due bills, $130.90. 

Liabilities. Mortgage favor State School Fund, 6%, $4000; interest due. 



146 FARM ACCOUNTS 

LESSON 49 
SPECIAL COST RECORDS 

Cost keeping is the most difficult of all phases of accounting, since it must 
deal with so many different and variable elements ; and this is particularly true 
on the farm. There is scarcely a factory in existence that has so many different 
problems to contend with as a large farm, which is often at once the producer, the 
manufacturer, and the distributor. The farmer must contend, not only with 
the usual problems of material, labor, and capital, which enter into the 
processes of manufacture, but he must contend also with the caprices of the 
elements, with the uncertain conditions of the climate, soil, and other natural 
environment. 

Fortunately, cooperation has done much to solve the problems of farm cost 
accounts. Cow-Testing Associations, Cooperative ^Creameries, Purchasing 
Agencies, and Fruit Exchanges are doing much of the intricate work necessary 
in accurate cost accounting. In the Cow-Testing Associations an expert makes 
the rounds among a certain number of farmers, usually once a month, tests the 
milk, examines the cows, prescribes rations, checks the records, and in countless 
ways directs the dairyman toward better methods and larger profits. In the 
exercises which follow, the details of testing individual animals is dispensed with, 
being attended to by the local Cow-Testing Association at the nominal cost of 
$1 per month. 

In cost records, account must be taken of the material, labor, and capital 
used in production. The most difficult of the three is the labor record, since on 
the farm the laborers must often move from task to task several times in the 
day. Adding to this the natural disinclination of the farmer for figures, and the 
matter of keeping even approximately accurate cost records will be apparent. 

It should be borne in mind that the cost records are wholly auxiliary to the 
financial records, and that the latter are complete without the former. How- 
ever, it is not possible to keep accurate cost records without reliable financial 
records, because of the financial data which enter into costs. 

The importance of the form of the records is often overlooked. In the first 
place, the form must be so arranged as to require the least amount of writing 
and the least expenditure of time to keep it up. It must also provide for the 
several elements of cost so as to guard against omissions and errors. Then the 
self-balancing and double-entry features must be present so that the several 



VALUATION AND DEPRECIATION 147 

accounts or columns in the financial accounts may check with corresponding 
columns in the cost accounts. In many cases the total of an account checks 
with a number of accounts in some other book, when the former is said to be 
the controlling account of the latter. And finally, the summaries must ex- 
hibit at a glance the information sought from the records and give in condensed 
form past experience as a guide in future operations. 

In the cost records which follow, an account is kept with each crop, as in- 
dicated in the plot, lesson 45, and the acre is the unit of costs. An account 
is kept also of each kind of stock. Ordinary journal paper is used with a 
half-inch column to the left of the money column for man labor and another 
for team labor, as shown in illustration 32. 

The details of the labor is found in the individual labor reports, illustration 
36, and only the number of hours for each operation is entered in the cost ac- 
count. The details of the feed consumed by the stock is found in the feed 
record, illustration 37, and only the total is entered in the cost accounts 

As explained in lesson 48, each crop is charged with depreciation of 
implements at the rate of 50f5 per acre, and, since the value of the land is $100 
per acre, and the local interest rate is 6 per cent, each acre is charged with $6 
interest on the capital invested. The stock is also charged with 6 per cent in- 
terest on the value of the barns for housing. 

Each cost account is debited with the inventory at the beginning of the year 
and credited with what is left at the end. 

The question of how manure is to be treated in the cost accounts requires 
careful consideration, since it is one of the most valuable assets on the farm if 
properly handled. 

One of the most thorough discussions of the value of stable manure is found 
in Bulletin 122 of the Maryland Experiment Station. The average dry excre- 
tion per animal given on page 132 is : Cows, 10 tons ; horses, G tons ; hogs, 1 ton. 
These figures have been used in this exercise and the value has been estimated 
at $1.50 per ton delivered on the field. The amount of manure is as follows: 
Calves, heifers, and colts at one half the above estimate. 

34 cattle 10 tons each 340 tons 

10 horses . 6 tons each 60 tons 

100 hogs 1 ton each 100 tons 

SOOton^ 
at $1.50 per ton, which totals $750. Dividing this by 246 acres of cultivated 



148 



FARM ACCOUNTS 



land gives $3 per acre and $12 over. This $12 is charged to Orchard and 
Garden to avoid fractions. The chicken manure is used on the truck garden 
and is estimated at about $15 per year. The sheep are charged low pasturage 
and are, therefore, not credited with the manure. 

It is thought that this distribution of the value of manure is more equitable 
and simple than to charge the particular field with the manure as it is applied, 
since the manure is used for the benefit of the whole farm. Of course, since the 
stock gets credit for the manure delivered on the field, the labor and depreciation 
of implements are charged to the stock. 

An adjustment should be made in the rate of charge per acre, where the num- 
ber of animals changes sufficiently to warrant it. 



Written Exercise — A 

Preliminary to taking up the several cost accounts, prepare a labor report 
as handed in by Mr. Phillips for the month of March. You will find a ruled 
form corresponding to illustration 36. 

Labor Report by H. M. Phillips, March, 1912 

Note. — The following data contains the names of accounts, date in paren- 
thesis, hours of man labor when only one number is given, and hours of man 
and horse labor when two numbers are given thus, 9-9. 



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Cattle and Dairy. Man labor (cleaning, salting, etc.), (March 6) 1 hr., 
(12) 1, (23) 4; Horses, (21) 3, (22) 9; Hogs, (16) 2, (26) 2; Sheep, (5) 1, (10) 1, 



VALUATION AND DEPRECIATION 149 

(24) 1, (29)1 ; Poultry, (6) 1, (12) 3, (15) 3 ; Improvements, ; Repairs (General 
except as noted) (6) 5, (horse barn), (14) 2, (21) 6 (machinery), (30) 3; Wheat, 
man and horse labor (plowing) (26) 7-7 ; Oats (plowing), (1) 9-9, (2) 9-9 
(3) 9-9, (5) 9-9, (7) 9-9, (8) 9-9, (9) 9-9, (10) 9-9, (13) 9-9, (14) 8-8, (15) 7-7, 
(16) 8-8, (17) 10-10, (19) 10-10, (23) 5-5, (24) A-A; Orchard and Garden (6) 
2, man labor (12) 5, (30) 5 ; Barley, man and horse labor (24) 4-4, (27) 9-9, 
(28) 9-9, (29) 9-9, (31) 9-9. 

Extend the total number of hours under each account in the respective total 
columns, as shown in the illustration. The total number of hours will be 251 
man, and 190 team hours. It is not necessary to extend this in terms of values, 
since this is done in the separate cost accounts, as shown in illustration 38. 
Note that the totals for plowing under wheat and under oats correspond to the 
respective entries in the cost accounts. Similarly when all the labor records 
are compiled for the different men, the amounts will correspond to those entered 
in the several cost accounts. 

Written Exercise — B 

Next reproduce the feed record as it was kept by student. Rule a sheet of 
blank paper found with your supplies to correspond to illustration 37, page 150. 
You need one line for each crop besides the headings. Be sure to have your 
teacher check the feed record before taking up the next lesson. 

Feed Record, 1912 

Wheat. Market price, $1 per bushel. Fed to chickens, 127 bushels. 
The poultry grain bin held 25 bushels and was filled five times with two addi- 
tional bushels required. The feeder simply made a mark in the quantity column 
each time the bin was filled. The- computation of value was made at the end 
of the year. Enter as in illustration 37. 

Oats. Market price, 45^ per bushel. Fed to cattle, 512 bushels. The cattle 
oat bin held 100 bushels and was filled five times, 12 bushels additional required, 
Fed to horses, 312 bushels. The oat bin for the horses held 100 bushels and was 
jfilled three times, 12 bushels additional required. Fed to poultry a little over 
120 bushels, amounting to $54.15. 

Barley. Market price, 50(j^ per bushel. Fed to cattle, 170 bushels. The 
cattle barley bin held 50 bushels and was filled three times, '20 bushels additional 



150 



FARM ACCOUNTS 



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required. A little less than 197 bushels of barley were fed to the horses, amount- 
ing to $98.40. Fed to hogs, 565 bushels. Fed to poultry a little over 85 bushels, 
valued at 140.20. 

Vetch. Market price, $10 per ton. Fed 26 tons to cattle. A little over 
13^ tons were fed to the horses, amounting to $135.20. Fed 4 tons to sheep. 

Clover. Market price, $11 per ton. Fed a little over 17 tons to cattle, 
valued at $188. A little over 13 tons were fed to the horses, amounting to 
$145.10. Fed 4 tons to sheep. 

Kale. Estimated at $2.50 per ton. Fed 80 tons to cattle, 40 tons to hogs 
and 10 tons to poultry. 

Corn Silage. Estimated at $3.50 per ton. A little less than 51 tons were 
fed to cattle, valued at $178. 

Rape Pasture. Estimated at $20 per acre. Hogs were pastured, es- 
timated value $150. Fed to sheep, estimated value $70. 



VALUATION AND DEPRECIATION 151 

Artichoke Pasture. Estimated value $35 per acre. Fed to hogs about 
half the crop, estimated value $175. 

Clover Pasture. Charged at cost. Charged to cattle, $262; horses, 
$74.80. 

Field Peas Pasture. Charged to hogs, at cost, $156.50. 

Timber Pasture. Pastured sheep, at $1 per head, $80. 



LESSON 50 
COST ACCOUNTS OF CROPS 

In computing the number of tons of hay for the inventory the follow- 
ing simple rule may be employed : Subtract the width from the over (the 
"over" is the distance from the ground on one side over the stack to 
the ground on the other side) ; divide by two ; and multiply by the width 
and then by the length. This gives the number of cubic feet in the stack. 
To find the number of tons, proceed as follows : For a stack 20 days old, 
or under, divide by 512 ; between 20 and 60 days old, by 422 ; over 60 days 
old, by 380. 

To find the amount of hay in a mow find the number of cubic feet and divide 
by 512. 

To find the number of bushels of grain in bins, take eight tenths (jq) of 
the number of cubic feet. If the bin is large, add one third of a bushel for every 
100 cubic feet. 

The best practice is to keep the general grain supply separate from 
the feed supply. This can always be done by providing bins for the 
feed of each kind of stock, each holding, say, 10, 25, 50, or" 100 bushels. 
Then by merely marking the number of times they are filled, the feed 
for the year is found accurately enough for all practical purposes. See 
llustration 38. 

The dates at which the several operations occur vary widely in different local- 
ities and are, therefore, omitted from the memoranda. It will be an interesting 
exercise, however, for the student to insert the dates so far as he can secure them 
from home or other sources in his locality. It is often an excellent practice to 
add memoranda other than financial. Such data are often of even greater im- 
portance than the costs and returns. 



152 



FARM ACCOUNTS 



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VALUATION AND DEPRECIATION 153 

Written Exercise 

Prepare 14 pages of journal paper by writing the headings of each crop in the 
same manner as in ilkistration 38. If not already provided with narrow columns 
for man labor and team labor, rule two extra columns each about f inch wide. 
Then prepare each account from the memoranda which follow. The Wheat 
account is shown in illustration 38. 

1. Wheat (Field 3a, 12 acres) 

Note. — " C " means cash book entries. 

Jan. 1. Cost — Inventory, $63; harrowing, man hours, 7, team hours, 7; 
seeding, 8-8; cutting, 12-12; shocking, 12-0.; marketing, 6-6 ; plowing, 33- 
33; twine (cash), $2.40; threshing 300 bu. at H (C), $18; 82 sacks at lOj^ 
(C), $8.20 ; man labor at 20?^, ( ?) ; team labor at 20^, ( ?) ; seed wheat, $12 ; 
interest and depreciation, (?) ; manure, (?). 

Returns — 300 bu. wheat at $1. 

Disposal — Sales (C), $164; fed to poultry, $127; seed, $12; Dec. 31, 
Inventory, $60. 

Find the total cost, returns, and profit. See illustration 38. 

2. Oats (Field 6, 52 acres) 

Jan. 1. Cost — Inventory, $195.75; plowing, 143-143; harrowing, 39-39 ; 
sowing, 39-39; cutting, 45-45; shocking, 39-0; threshing, 10-0; hauling, 
20-20; man labor, ( ?) ; team labor ( ?) ; twine (C), $15.80; threshing 3120 
bu. at 4i (C), $124.80; seed oats, $33.60; interest and depreciation, ( ?) ; ma- 
nure, ( ?). 

Returns — 3120 bu. oats at 45^. 

Disposal— Sales (C), $954; seed oats, $38.10; fed to cattle, $230.40; 
horses, $140.40; poultry, $54.15 ; Dec. 31, inventory, $182.70. 

3. Barley (Fields 5a and 10, 33 acres) 

Jan. 1. Cost — Inventory, $136.50; plowing, 91-91; harrowing, 16-16; 
sowing, 21-21 ; cutting, 33-33 ; shocking, 25-0; hauling, 14-14 ; man labor, ( ?) ; 
team labor, (?) ; twine (C), .$8.15; threshing 1155 bu. at 5^ (C), $57.75; seed 
barley, $28.30; interest and depreciation, ( ?) ; manure, (?). 



154 FARM ACCOUNTS 

Returns — 1155 bu. barley at 50^. 

Disposal — Sales, $68.60; fed to cattle, $85; horses, $98.40; hogs, $282.50; 
poultry, $40.20 ; seed, $28.30; Dec. 31, inventory, $111. 
Submit your work for approval. 

4. Vetch and Rye (Field 8, 35 acres) 

Jan. 1. Cost — Inventory, $175; plowing, 96-96 ; harrowing, 26-26; sow- 
ing, 26-26; mowing, 31-31; raking, 18-18; stacking, 132-88; hauling 45-45 ; 
man labor, ( ?) ; team labor, ( ?) ; rye seed (C), $12.25 ; vetch seed (C), $63 ; 
baling 15 T. at $2. (C), $30; interest and depreciation, ( ?) ; manure, ( ?). 

Returns — 112| T. hay at $10. 

Disposal — Sales, $639.80; fed to cattle, $260; horses, $135.20; sheep, 
$40; Dec. 31, inventory, $225. 

5. Clover and Timothy (F'ields 4rt and 9, 26 acres) 

Jan. 1. Cost — Inventory, $121 ; mowing, 23-23 ; raking, 1.3-13 ; stacking, 
98-64 ; hauling, 40-40 ; man labor, ( ?) ; team labor, ( ?) ; seed (C), $31.20 ; 
baling 10 T. at $2 (C), $20; interest and depreciation, ( ?) ; manure, ( ?). 

Returns — 78 T. hay at $11. 

Disposal — Sales, $359.90; fed to cattle, $188; horses, $145.10; sheep, 
$44; Dec. 31, inventory, $242. 

6. Kale (Fields 36 and 46, 6 acres) 

Jan. 1. Cost — Inventory, 0; plowing, 19-19; harrowing, 6-6; disking, 
6-6 ; harrowing, 6-6 ; marking, 6-0 ; transplanting, 220-0 ; cultivating 54-30 ; 
harvesting, 240-120 ; man labor, ( ?) ; team labor, ( ?) ; interest and depre- 
ciation, (?); manure, ( ?) ; seed (C), $3. 

Returns — 150 T. kale at $2.50. 

Disposal — Fed to cattle, $200; hogs, $100; poultry, $25; Dec. 31, in- 
ventory, $50. 

7. Corn (Field 56, 7 acres) 

Jan. 1. Cost — Inventory, $73 ; plowing, 23-23 ; harrowing, 8-8 ; planting, 
6-6; cultivation, 21-21 ; cutting, 11-11 ; hauling, 45-45 ; filling silo, 40-16; 
man labor, ( ?) ; team labor, ( ?) ; seed corn (C), $2.70; twine (C), $4.20; fuel 



VALUATION AND DEPRECIATION 155 

for engine (C), $3.50; power machinery (C), $11.20; interest and deprecia- 
tion, ( ?) ; manure, ( ?). 

Returns — 12 T. ensilage at $3.50. 

Disposal — Fed to cattle, $178; Dec. 31, inventory, $189. 

8. Rape (Field 1, 11 acres) 

Jan. 1. Cost — Inventory, 0; plowing, 36-36; disking, 11-11; harrowing, 
11-11; planting, 50-0; man labor, ( ?) ; team labor, ( ?) ; seed (C), $2.55; 
interest and depreciation, ( ?) ; manure, ( ?). 

Returns — Pasture at $20 per acre. 

Disposal — Fed to hogs, $150 ; sheep, 



9. Artichokes (Field 2, 10 acres), (5 years) 

Jan. 1. Cost — Inventory, 0; plowing, 33-33; harrowing, 6-6; disking, 
11-11; harrowing, 6-6; cutting (|), 118-10; cultivating, 50-50; man labor, 
(?); team labor, ( ?) ; interest and depreciation, ( ?) ; manure, (?). 

Returns — Pasture at $35 per acre. 

Disposal — Fed to hogs, $175 ; Dec. 31, inventory, $175. 

10. Clover Pasture (Fields 7 and 13, 34 acres) 

Jan. 1. Cost — Inventory, ; f T. land plaster (C), $11; appHcation man 
labor, 14-0; interest and depreciation, ( ?) ; manure, (?). 

Returns — Pasture charged at cost to horses, $74.80 ; cattle, $262. 

11. Field Peas (Field 12a, 10 acres, pasture) 

Jan. 1. Cost — Inventory, 0; plowing, 33-33; harrowing, 6-6; disking, 
11-11; planting, 15-15; harrowing, 6-6 ; man labor, ( ?) ; team labor, ( ?) ; 
seed peas (C), $28.60; seed oats, $4.50; interest and depreciation, ( ?) ; 
manure, ( ?). 

Returns — Pasture charged to hogs at cost, $156.50. 

12. Timber and Pasture (No. 11, 50 acres) 

Jan. 1. Cost — Inventory, $162; cutting wood, 330-0; hauling wood, 205- 
140; man labor, (?) ; team labor, (?) ; interest and depreciation, ( ?). 



156 FARM ACCOUNTS 

Returns — 80 cords wood at $4 ; sheep pasture, 80. 

Disposal — Sold posts and wood, $227 ; household use, $50 ; sheep pasture, 
Dec. 31, inventory, $205. 



1.3. Potatoes (Field 26, 10 acres) 

Jan. 1. Cost — Inventory, $150; plowing, 28-28 ; harrowing, 7-7 ; disking, 
10-10; harrowing, 7-7; cutting and planting, 50-25; cultivating, 100-100; 
spraying, 50-0; gathering, 175-75; sacking, 50-0; hauling, 94-94; man 
labor, (?) ; team labor, ( ?) ; spraying material (C), $2.50 ; 800 sacks at b(ti (C.) ; 
seed potatoes, $64.20 ; interest and depreciation, ( ?) ; manure, (?). 

Returns — 1500 bu. potatoes at 60(i^. 

Disposal — Sales, $815; seed potatoes, $64.20; household use, $25; 
Dec. 31, inventory, $145.80. 

14. Orchard and Garden (No. 14, If acres) 

Jan. 1. Cost — Inventory, $16; plowing and harrowing, 24-13; planting, 
28-0; cultivation, 68-39; pruning, 25-0; spraying, 40-0; thinning, 20-0; 
harrowing and weeding, 8-2; picking and packing, 139-0; hauling and 
marketing, 52-33 ; man labor, ( ?) ; team labor, ( ?) ; seeds and plants (C), 
$4.40; cuttings (C), 75^; boxes and sacks (C), $28.70; twine and paper (C), 
$5.20 ; spraying material, $2.90 ; interest and depreciation, $72 ; manure, $27. 

Returns — 150 boxes apples at $1; 50 boxes pears at $1.20; 700 lb. 
straw^berries at 5^; 600 lb. blackberries at 5^; 75 sacks onions, at $1.25; 
garden truck, $75. 

Disposal — Cash sales, $333.25; household use, $60.50; Dec. 31, inventory, 



From records kept by Mrs. Phillips, and from careful estimates, it is agreed 
that .the household used the following products from the orchard and garden : 
apples, $20 ; pears, $7.20 ; strawberries, $10 ; blackberries, $7.50 ; onions, $5 ; 
garden truck, $10.80; total, $60.50. Orchard and garden is ^credited and 
household debited for the total. 



VALUATION AND DEPRECIATION 157 

LESSON 51 

COST ACCOUNTS OF LIVE STOCK 

Exercise 

The live stock cost accounts are prepared in exactly the same manner as 
the crop accounts and require no further directions. The memoranda for the 
year's work, omitting certain details, are given below. 

Cattle and Dairy 

Jan. 1. Cost — Inventory, $1940; feed record, $1403.40; labor record, 
2800 hr. 20^; veterinarian (C), $7; membership Cow-Testing Association 
(C), $12 ;j^ interest on $1940 at 6 per cent; depreciation on dairy equipment, 
20 per cent, $31.20 ; housing, 6 per cent on $1900. 

Returns — Dairy sales, $1998.10; cattle sales, $300; 2 veals for home 
use, $20; skim milk, 120,000 lb. at 25^ cwt. ; manure, 340 T. at $1.50; milk 
for home use, $73; Dec. 31, inventory, $2080. 

Horses 

Jan. 1. Cost — Inventory, $1950; feed record, $593.90; labor record, 750 
hr. at 20^; shoeing (C), $15; veterinary service (C), $15; breaking colts 
(C), $90; interest on $1950 at 6 per cent; depreciation on harness, etc., 20 
per cent, $35 ; housing, 6 per cent on $1000. 

Returns — Labor record crops, $426.40; labor record cash, $120; sold 
3 colts at $125; manure, 60 tons at $1.50, $90; household use of driving 
horses, $80 ; Dec. 31, inventory, $2025. 

Hogs 

Jan. 1. Cost — Inventory, $565; feed record, $864; labor, 900 hr. at 
20f5; skim milk, 110,000 lb. at 25^ cwt.; interest on $565 at 6 per cent; 
depreciation and sire, 3 per cent on $250 ; housing, 6 per cent on $200. 

Returns — Sales 25,000 lb. at 7^; home use 750 lb. at li; manure, 
100 T. at $1.50; Dec. 31, inventory. 



158 



FARM ACCOUNTS 



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Jan. 1. Cost — Inventory, $171.25; 
10,000 lb. at 25^!^ cwt. ; labor record, 600 
6 per cent ; housing, 6 per cent on $75. 

Returns — Sales, 150 lb. chickens at 
lb. ducks at 20^ ; 100 lb. geese at 20^ ; 
235 doz. eggs at 40(2^ ; Mar., 285 doz. eggs 
May, 235 doz. eggs at 20^ ; June, 210 doz 
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use (estimated), 240 doz. eggs at 25^; 
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feed record, $246.35; skim milk, 
hr. at 20^; interest on $171.25 at 

15^; 360 lb. turkeys at 20^; 200 
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at 25^ ; April, 260 doz. eggs at 20^ ; 
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Sheep 

Jan. 1. Cost — Inventory, $320; feed record, $234; labor record, 100 hr. 
at 20^; shearing 80 sheep at 10^; interest on $320 at 6 per cent; housing, 
6 per cent on $50. 

Returns — Sales, 640 lb. wool at 20^ ; sales, 80 sheep at $3 ; sales, 2 sheep 
at $5 ; home use, 2 sheep at $5 ; Dec. 31, inventory. 



VALUATION AND i DEPRECIATION 



159 



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LESSON 52 I r 
[COST SUMMARIES 

The cost summaries are merely recapitulations of what is found in the several 
cost accounts. They divide themselves naturally into first the two departments, 
Crops and Live Stock, and then each department shows the cost, returns, and 
the profit or loss. Take wheat as illustrated in 38. The total cost is 
$246.40 ; enter in the total column of the summary then the inventory, the 
labor, and the other items, as found in the cost accounts. The returns are 
treated in the same manner. When all the crop cost accounts have been 
entered and totaled, the net gain or loss for all the crops is found. Similarly 
for the live stock. Not only that, but it is seen that all the crops and all the 
returns for the stock are accounted for. 

The records of any business are kept as means of control and guidance for its 
operations. From the cost summaries many lessons may be drawn by the farm 
manager. We shall not go into detail, but consider only two important ques- 
tions. The first is regarding labor. From the several cost accounts, we see that 
3799 man hours were expended on crops, and 2L32 team hours. 5150 hours were 
devoted to the several branches of live stock. The total man labor expended 
on the productive end of the business was 8949 hours. Counting 300 working 
days to the year and ten hours per day gives 9000 hours for 3 men, which in- 



160 



FARM ACCOUNTS 



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dicates that the labor was well employed, even allowing for the occasional extra 
labor. On the other hand, the horses are credited with only 2132 hours' labor 
on crops and 600 outside labor. Even allowing for the time spent on general 
work and business trips, this would indicate that each team worked scarcely 
three hours per w^orking day. The wisdom of using mares instead of horses is, 
therefore, apparent since a large share of the profit lies in raising colts. 

The timber pasture shows a loss of $20. Even though this may be expected, 
and partly justifiable, it is subject for reflection. Perhaps it should be improved 
or put to better use. 

If it be asked how it is that interest and depreciation is represented in the 
profit and loss statement as a gain, the answer is that it is merely what is called 
a "transfer entry" since it will be seen that the profits of crops and live stock 
have been reduced by a like amount. This was done to show the exact results of 
the several enterprises on the same basis, as if it had been done on borrowed 
capital. 

Written Exercise 

The student will now insert the headings on a sheet ruled like illustration 39 
and complete the summaries by writing in the results in the several cash ac- 
counts. Having found the net gain, check it with your instructor before pro- 
ceeding to the next lesson. 



VALUATION AND DEPRECIATION 



161 



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Dlustration 39 

LESSON 5.^ ' 

THE ANNUAL STATEMENT 

The Annual Statement consists of summaries of the year's business, as shown 
in detail by the several records. Usually it consists of three parts, viz. (a) a 
statement of Resources and Liabilities, (6) a statement of Receipts and Pay- 
ments, (c) a general statement of Profit and Loss. To this is added a summary of 
costs, returns, and profits of the several enterprises, where cost records are kept. 

Besides the information the statement affords, it is of the greatest value in 
assisting the business man in forming an accurate judgment of the future conduct 
of his business. 

Nothing will be of greater assistance in determining what records should be 
kept than the annual statement, since it will show the defect of the accounting 
system more clearly than anything else, and will often give a clew as to how 
the system may be simplified and perfected. \\\ fact, it is a practice among 
expert accountants, first to outline the information desired in the form of 
an annual statement and then devise the records so as to aflford the desired 
information. 

The annual statement of Phillips and Student is exceedingly easy to prepare. 
(a) The inventory has been prepared already and in its connection the other re- 
sources and also the liabilities are stated. (6) The financial statement is taken 



162 FARM ACCOUNTS 

directly from the totals of the cash book ledger, (c) The profit or loss is 
found by taking the difference between the net worth now and that of 
a year ago. (d) The cost summaries are taken directly from the cost 
accounts ; and {e) from the financial statement and the cost summaries the 
statement of profits and losses is made up. It exhibits the source of the 
profits and losses in totals, while the details are shown in the cost summaries. 
The correctness of the profit and loss statement is shown by the fact that 
the net gain or loss is the same as that shown in the resource and liability 
statement. 

The student should bear in mind that he will probably be called upon, in later 
years, to prepare financial statements for publication. It may be in the capacity 
of corporation treasurer or as a public servant. In either case, it is highly im- 
portant to know how to prepare a proper report so that it will be comprehen- 
sive and easily understood by the public. The form used in this exercise is 
often seen in public reports. 

Written Exercise 

On a sheet of journal paper prepare a statement of receipts and payments 
in the following form, and submit it to your teacher for approval : 

Financial Statement, Year ending Dec. 31, 1912 



RECEIPTS 



Balance on hand, Jan. 1 
Farm crops 
Orchard and garden 
Wood and posts 

Total crops 
Cattle and dairy 
Horses 
Hogs 
Sheep 
Poultry 

Total stock and dairy 
Interest 

Total receipsts 



VALUATION AND DEPRECIATION 163 

PAYMENTS 



Stock and dairy 

Crops 

Man labor 

Improvements 

Implements 

Repairs 

General expenses, interest and taxes 

Bills Payable 

County Growers' Association, stock 

Balance on hand 

Total payments 



Statement of Profits and Losses 

PROFITS 

Crops, as per summary 
Live stock, as per summary 
Interest and cepreciation charged to 

crops and live stock 

Less 10% on implements 

Interest received (cash) 
Increase in supply inventory (inventory) 
Decrease in liability interest and labor (inventory) 
Total 



LOSSES 

Labor as per cash book 

Less charged to crops and stock summaries 

Household (crop and stock summaries) 

Repairs (cash) 

General expenses (cash) 

Net profit 

Total 



164 FARM ACCOUNTS 

PROOF 

Net worth as per inventory 

Net worth last year inventory 

Net profit 

LESSON 54 

REVIEW QUESTIONS 

On Farm Set II 

1 . Why is the inventory the most important record on the farm r 

2. What should be included in the inventory and what should not be[in- 
cluded ? Discuss. 

3. Explain a convenient method of taking the inventory. 

4. Describe the continuous inventory and explain its advantages. 

5. What is the advantage of organizing the business into departments ? 

6. Discuss the advantage of several dates in taking the farm inventory. 

7. What is your own opinion on the subject ? 

8. Describe a method of either reducing or enlarging the plot of a farm. 

9. What is the object of the farm plot from the accountant's point of view ? 

10. State a convenient scale in drawing acreage. 

1 1 . How may farming be reduced to a strictly cash business ? 

12. Discuss the advantage of discounting bills, and illustrate by a simple 
example. 

13. How are the terms of dealers' bills indicated ? 

14. Explain the importance of paying definite items whenever it is practicable 
rather than to pay on account. 

15. What is the advantage of depositing all moneys received and paying all 
bills by check ? 

16. How should petty cash be handled ? 

17. How is the cash balanced ? 

18. How may the voucher be made to take the place of itemized statements 
in the cash book ? 

19. If sales are made on time, how may they be regarded as cash items ? 

20. Explain the several headings of the distribution columns. 

21. What advantage in forwarding the totals from page to page rather than 
the balance ? 

22. How should columns having a number of classes of entries be segregated ? 



VALUATION AND DEPRECIATION 165 

23. Explain the method of filing vouchers. 

24. Explain the voucher check and its advantages. 

25. Why are household and personal expenses excluded from the business 
accounts ? 

26. What important questions arise in connection with the annual inventory ? 

27. On what does the actual value of any business depend ? Illustrate. 

28. Why does sentiment sometimes influence the valuation of property ? 

29. Is this legitimate ? Why ? 

30. What value should be placed on stock and farm produce ? 

31. Define depreciation and point out four causes. 

32. Give a simple example showing the method of computing depreciation. 

33. How is depreciation the result of new inventions and of style ? Discuss. 

34. Explain four practical methods of computing depreciation ? 

35. Why is it impracticable to fix a satisfactory rate of depreciation from live 
stock ? 

36. Explain the methods of fixing depreciation from implements and how 
may this be applied to crops in cost accounts ? 

37. What difficulties in fixing permanent rates of depreciation ? 

38. Give some rates of depreciation which are commonly used. 

39. How should the rate be corrected ? 

40. Why is cost keeping the most difficult of all phases of accounting ? 

41 . What agencies are cooperating with the farmers in this subject ? 

42. What difficulties in the way of computing exact labor records ? 

43. Discuss the relations between financial records and cost records. 

44. Give several reasons why the form of records is important. 

45. Discuss the basis upon which the interest to be charged against the crops 
is found. 

46. Why are the inventories debited at the beginning of the year and credited 
at the end ? 

47. Give several reasons why barn manure is an important subject. 

48. Prepare a statement for the next recitation of how this is handled on some 
farm you know. 

49. Prepare an example illustrating a simple rule for finding the amount of 
hay in a stack. In a mow. (You will find it more interesting to take an actual 
stack or an actual mow if one is accessible.) 

50. Discuss two methods of computing the number of bushels in grain bins 
and bring in an illustrative example. 



166 FARM ACCOUNTS 

51. Describe the process of preparing the cost summaries. 

52. How are they balanced and proved ? 

53. What important conchisions may be drawn from these summaries ? 

54. Discuss several besides those discussed in the lesson. 

55. Explain how interest and depreciation can be a profit. 

56. Has any one paid this to the firm ? If so, why ? 

57. Discuss fully the annual statement, its form and importance. 

58. How is the statement prepared ? 



VALUATION AND DEPRECIATION 167 

LESSON 55 
FARM IMPLEMENT BUSINESS 

It is the object of this set to acquaint the student with a method of keeping 
books suitable for any ordinary mercantile business. The books of original 
entry used are journal, cash book, purchase book, and sales book. 

All cash transactions will be entered in the cash book — cash received on the 
left page, and cash paid out on the right page, as shown in illustration 40. 
No cash account will be kept in the ledger as all cash debits and all 
cash credits appear in the cash book and the difference between the two sides of 
the cash book will be the cash balance. The cash book is in reality a detached 
ledger account. In making a trial balance, therefore, the cash balance will be 
taken from the cash book. 

You will note that when cash is received, cash is debited by making your 
entry on the debit, or left, side of your cash book and the account to be credited 
is written in the column indicated by the heading. When cash is paid out, cash 
is credited by making the record on the credit, or right, side of the cash book 
and the account to be debited is written in the appropriate column as indicated 
by the heading. 

All sales will be entered in the sales book, except small cash sales, as in illus- 
tration 41, page 170. i\.t the end of each month the total of the sales for the 
month is carried to the credit side of the merchandise account in the ledger as 
in illustration 41, page 170. Each person whose name appears in the sales 
book will be debited in the ledger for the amount of his purchase. Since 
merchandise is credited only once a month instead of each time a sale is made, 
much space is saved in the merchandise account and much time is saved in post- 
ing the sales entries. Another advantage of the sales book is that from it one 
can ascertain the total sales for each month, or or any period that may be desired. 

All purchases are entered in the purchase book as in illustration 42, page 
171. The total of the purchase book is carried once a month to the debit side 
of the merchandise account in the ledger as shown in the illustration on page 171. 
Each purchase is credited to the account of the person of whom it was purchased. 
By this method of recording purchases, time and space are saved, as was ex- 
plained in connection with the sales book. 

All transactions, except sales, purchases and cash transactions are recorded 
in the journal in the form shown in illustration 10, page 38. 



168 



FARM ACCOUNTS 






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VALUATION AND DEPRECIATION 



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FARM ACCOUNTS 



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Illustration 42 

George Watson has decided to purchase the farm implement business of 
James Grayson, 389 West Main St., in your city. As a result of negotiations 
Mr. Grayson has offered to sell his business to Mr. Watson, including stock, 
fixtures, and good will, for $ 5000 in cash. The latter accepts this offer and it is 
agreed that Mr. Grayson is not to enter into competition with Mr. Watson 
for a period of ten years. By "good will" is meant, the established trade 
of a business and one who sells his "good will" either expressly or impliedly 
agrees to do nothing to attract his old customers away from the business he 
is selling. 

A new lease of the store has been taken, and a monthly rental of % 50 is 
to be paid Charles Sumner, the owner. 

Student has been engaged to keep the books and take charge of the other 
office duties at a monthly salary of $ 50. 

Walter Williams has been hired to clerk in the store at a weekly salary of 



172 FARM ACCOUNTS 

When sales are made a sales slip is made out by the one making the sale 
One copy goes to the customer and the other is filed in numerical order. If ref- 
erence is made to the sales slip number in the books it is generally unnecessary 
to copy the items into the sales book. See illustrations and pages 000 and. 

Invoices of merchandise bought are checked up and approved by Mr. Watson 
and then turned over to the bookkeeper who enters and files them. Memoranda 
giving all necessary details of the day's transactions will be furnished the 
bookkeeper each day. 

Mr. Watson makes all payments and attends to all financial matters. 

All money will be deposited, and all payments will be made by check. 

R. E. Davidson was employed to make an appraisal of the stock, and store 
fixtures and he has submitted the following report which has been approved by 
Mr. Watson : 

Merchandise — 

1 wheel plow 

4 walking plows 
3 spring tooth harrows 

5 cultivators 
3 wide tire trucks 

2 wagon boxes 

6 spring seats 
2 grain drills 
1 grain binder 
1 corn binder 
1 straight tooth drag 

1 disk harrow 

2 shovell plows 
2 manure spreaders 
2 mowers 

2 hay rakes 

3 hay forks — complete 

1 steel roller 

2 potato diggers 
1 hay tedder 
1 corn harvester 
1 ensilage cutter 



$35. 


$35, 


12. 


48, 


15. 


45, 


8. 


40. 


75. 


225, 


18. 


36, 


2. 


12. 


110. 


220. 


120. 


120. 


100. 


100. 


12. 


12. 


35. 


35 


3. 


6. 


150. 


300, 


40. 


80. 


25. 


50. 


25. 


75. 


24. 


24. 


130. 


260. 


35. 


35. 


100. 


100. 


40. 


40. 



VALUATION AND DEPRECIATION 173 

1 stump puller 

1 spraying outfit 
25 milk cans 

2 corn shellers 

3 farm scales 

2 seed cleaners 

hand tools 

Total at list prices 
Less 20 per cent 

Furniture and Fixtures — 
1 roll top desk 
1 bookkeeper's desk 
1 flat-top desk 
1 safe 

3 showcases 
8 chairs 

1 counter — 12 ft. 
5 sections — top and base — files 
1 underwood typewriter 
1 table 

Miscellaneous items 

$478.50 

It is customary in beginning a business to write a complete explanation that 
will show all the important facts regarding investment, employees, salaries, rent, 
etc. From the data given above write an appropriate explanation on the first 
page of your journal. 

Mr. Watson invests $3000 in addition to the $5000 paid Mr. Grayson. 

As all outstanding accounts on the books of James Grayson are to be collected 
by him personally, the only opening entry necessary in Mr. Watson's books will 
be a journal entry as follows : 



150. 


150. 


15. 


15. 


1.50 


37.50 


10. 


20. 


15. 


45. 


40. 


80. 




450.60 




$ 2696.10 




539.22 




$2156.88 


$30. 


$30. 


48. 


48. 


18. 


18. 


125. 


125. 


20. 


60. 


3. 


24. 


35. 


35. 


3.50 


17.50 


75. 


75. 


8. 


8. 




38. 



Cash 


$3000. 


Mdse. 


2156.88 


Furniture and fiixtures 


478.50 


Good will 


2364.62 


George Watson 





$8000. 



174 FARM ACCOUNTS 

The cash is checked so that it will not be posted. It should be entered on 
the debit side of the cash book as " cash on hand." See illustration of cash book. 

Transactions 

1 — Jan, 2 — Paid one month's rent by check. 

2 — Jan. 3 — Paid R. E. Davidson for appraisal services, $5. 

3 — Jan. 4 — Paid City Book Store's invoice for books, stationery, and 

office supplies, $ 122.60. 

4 — Jan. 5 — Paid the Rural Weekly Journal's bill for printing announce- 

ments of the purchase of the business by Mr. Watson, $ 10.50. 

5 — Jan. 6 — Sold Arthur Hillman a wide-tire truck for cash, $ 75. (Sales 

book and cash book.) 

6 — Jan. 7 — Sold hand tools and miscellaneous articles for cash, $ 76.80. 

(Cash book.) 

7 — Jan. 8 — Sold to J. F. Painter, one cultivator, $ 8 ; 1 walking plow, 

-1 12 ; 1 wagon box, $ 18. Received one half in cash 
and 4 months' note for the balance. (Sales book, cash 
book, and journal.) 

8 — Jan. 9 — Bought of Excelsior Tool Co., Mobile, 111., invoice of Jan. 5, 

1 disk harrow, $ 28 ; 1 straight tooth-drag, $ 10. Terms, 
5 per cent 30 days, 4 months net. (Purchase book.) 

9 — Jan. 11 — Bought of Farmers' Supply Co., Fort Wayne, Ind., invoice 

of Jan. 9, 1 doz. plow points at $12; 2 doz. steel 
hoes at S 3.60 ; | doz. steel spades at $ 7.20. Terms, on 
account, 30 days. 

10 — Jan. 12 — Sold to Wallace Carter on account, 1 manure spreader, $ 150 ; 

1 shovel plow, $3; 1 potato digger, $ 130. 

11 — Jan. 14 — Cash sales of small hand tools to date, $ 62,80. 

12 — Jan. 15 — Paid Walter Williams two weeks' salary by check. 

13 — Jan. 16 — Sold Harvey Cross on account, 1 spring seat, $ 2 ; 1 wagon 

box, $ 18 ; 1 corn harvester, $ 100 ; 1 manure spreader, % 150. 

14 — Jan. 18 — Sold Warren Sterling on his 3 months' note, 1 grain drill, 

$ 120. (Sales book and journal.) 

15 — Jan. 21 — Bouglrt of General Farm Implement Co., Dayton, Ohio, 

invoice dated Jan. 18, 3 cream separators at $ 30. Gave 
check for one half, and 3 months' note for the balance. 
(Purchase book, cash book, and journal.) 



VALUATION AND DEPRECIATION 175 

16 — Jan. 25 — Cash sales of small tools reported by Mr. Williams, $ 96.75. 

17 — Jan. 27 — Sold George Granger on his 30-day note, 1 wheel plow, 

$ 35 ; 1 spraying outfit, $ 15. 

18 — Jan. 29 — Sold James Harrison on account, 2 walking plows at $ 12 ; 

1 spring-tooth harrow, $ 15 ; 1 wide-tire wagon truck, 
$ 75 ; 1 hay rake, $ 25. 

19 — Jan. 31 — Cash sales to date, $ 89.75. 

20 — Jan. 31 — Paid Strong Carting Co. by check, for cartage during the 

month, $ 15. (Debit Freight & Cartage.) 

21 — Jan. 31 — Paid bookkeeper's salary for month by check. 

22 — Jan. 31 — Paid Walter Williams two weeks' salary by check. You may 

now close your cash book, as in illustration 40, page 000. 
Submit your cash book to your teacher for approval. 

Posting 

Open accounts as follows : George Watson, Prop., one fourth page ; Merchan- 
dise, one half page ; Bills Receivable, Bills Payable, Expense, Furniture and 
Fixtures, each one third page ; all other accounts one fourth page. 

Post the journal entries for January in the same manner as you have 
done in the preceding exercises. Remember to post all debits first and 
then all credits ; also remember to place the page of the ledger account in 
the folio column at the left of each entry in the original entry books when you 
post. 

Post each sale in the sales book to the debit of the person to whom the sale 
was made and the total sales for the month to the credit of merchandise, as 
Indicated in illustration 41, page 170. Remember that all accounts on the 
left-hand side of the cash book are to be credited for their respective amounts and 
all accounts on the right-hand side of the cash book are to be debited for the 
amounts indicated. 

After completing your posting, foot all the accounts in the ledger, and 
ascertain the balance of each account by subtracting the smaller from the larger 
side in pencil figures on the side of the account which is the larger, as in illustra- 
tion 11, pages 41, 42, and 43. Make a trial balance, using balances. 

Submit your trial balance to your teacher for approval. 



27- 


-Feb. 


28- 


-Feb. 


29- 


-Feb. 


30- 


-Feb 


31- 


-Feb. 



176 FARM ACCOUNTS 

Transactions 

23 — Feb. 1 — Paid rent for Feb., $ 50. 

24 — Feb. 1 — Paid Lehigh Coal Cos.' bill for coal, $ 70. 

25 — Feb. 3 — Sold Walter Jones on his 60-day note, 1 corn sheller, $ 10 ; 

1 farm scales, $ 15. 

26 — Feb. 4 — Paid Excelsior Tool Cos.' invoice of the 5th ult. less 5 per cent 

discount. 

5 — Sold Warren Sterling for cash, 1 cream separator, $ 40. 

6 — Bought of Central Tool Co., Madison, Wis., invoice of Feb. 
1, 2 walking plows at $ 10; 2 wagon boxes at $ 15; 1 wide 
tire truck, $ 60. Terms, yq, -^q, n/60. 

8 — Paid Walter Williams one week's salary by check. 
8 — Paid Farmers' Supply Cos.' invoice of the 9th ult. due to-day 

by check. 
10 — Paid freight bills by check, $61.30. (Debit Freight & 
Cartage.) 

32 — Feb. 11 — Paid Central Tool Co's. invoice of the 1st inst. less 2 per cent 

discount by check. 

33 — Feb. 11 ^ — Paid gas and electric light bill for January by check, $ 6.50. 

34 — Feb. 12 — Cash sales of small items to date, S 186.90. 

35 — Feb. 14 — Bought of the A. B. Granger Co., Kansas City, Mo., invoice 

of Feb. 10, 1 manure spreader, $ 120. Terms, 60-day note. 

36 — Feb. 15 — Sold James Harrison 10 milk cans at S 1.50 ; 1 steel roller, $ 24 ; 

1 hay fork — complete, 25. Received cash in full. 

17 — Sold James L. Bristol, 1 grain drill, $ 110 ; 1 grain binder, $ 120. 
Received one half in cash and note at 3 months for the 
balance. 

18 — Paid Walter Williams one week's salary by check. 
20 — Discounted James L. Bristol's note of the 17th inst. at the 

State Bank and received credit for the proceeds. 

22 — Cash sales of small tools to date $ 169.40. 

23 — Sold David Mason on account 1 stump puller, $ 150 ; 1 seed 

cleaner, $ 40 ; 1 potato digger, $ 130. 

42 — Feb. 25 — Paid my note of the 14th inst., favor of A. B. Granger & Com- 

pany, less discount to maturity. 

43 — Feb. 26 — Received cash from George Granger for his note of the 

27th ult. due to-day. 



37- 


-Feb. 


38- 


-Feb. 


39- 


-Feb. 


40- 


-Feb. 


41- 


-Feb. 



VALUATION AND DEPRECIATION 177 

44 — Feb. 27 — Received cash from James Harrison to apply on account, $ 50. 

45 — Feb. 28 — Sold Walter Jones, on 3 mos. note, 1 manure spreader, $ 150. 

46 — Feb. 28 — Bought of Henry Clay & Son, St. Paul, Minn., 1 steel roller, 

$ 20 ; 1 spraying outfit, $ 12. Terms, on account. 

47 — Feb. 28 — Paid Walter Williams one week's salary by check. 

48 — Feb. 28 — Paid bookkeeper's salary for month. 

49 — Feb. 28 — Paid Strong Carting Company, by check, for cartage during 

month, $ 19.50. 

You may post the cash book, sales book, purchase book, and journal exactly 
as you did at the end of the preceding month. Check your posting. 

Balance your cash book as you did at the end of January. 

Find the balance of each account in your ledger, making the computation in 
lead pencil on the larger side of each account. Then make a trial balance, using 
the balances. 

You ma}" now submit your trial balance and books of original entry to your 
teacher for approval. 

When they are returned you may make out statements of resources and liabil- 
ities and losses and gains exactly as you did in lesson 14, The inventories are as 
follows : Merchandise $ 1043.10, Furniture & Fixtures $ 158.67, Expense $ 180. 

After you have completed the statements you may close your ledger as you 
did in lessons 15, 22, 23. Remember that the inventories are all resource 
inventories and therefore should be entered on the credit side of their respective 
accounts. 

Compare the present worth which was obtained in your statement of resources 
and liabilities with the present w^orth obtained by closing the loss and gain 
accounts in the ledger. 

Close all personal accounts, except those with only one entry. 
Hand your work to your teacher for approval. 

LESSON 56 
REVIEW QUESTIONS ON LESSON 55 

1. In what ways does the "mercantile" business differ from the farm 
business ? 

2. What books of original entry are used in this set ? 

3. Where were all the cash transactions entered ? Why? 



178 FARM ACCOUNTS 

4. Why was no cash account kept in the ledger ? 

5. In making the trial balance where was the cash balance obtained ? 

6. If you were told that in recording a given transaction cash must be 
debited in the cash book, on which side would you make the record ? Why ? 

7. Where and how were all sales entered in this set ? 

8. Explain the advantage of the sales book. The cash book. 

9. Where and how were the purchases entered ? 

10. Explain the advantage of the purchase book. 

11. What use is made of the journal in this set ? 

12. What is a sales slip and how is it used ? 

13. What are an appraiser's duties? 

14. What record should be made on the first page of the journal before 
entering any of the transactions ? 

15. Explain how the cash is proved. 

16. Explain how the cash book is closed. 

17. How is the cash book posted ? The sales book ? The purchase book ? 

18. In closing your ledger what did you do with the resource inventories ? 

19. In what two ways did you ascertain the present worth ? 

20. What is the object of closing the ledger at stated periods ? 



INDEX 



INDEX 



Account, basis of bookkeeping . 
Account, closing of an 
Account, defined 
Account, purchase on 
Allowance, rules for journalizing 
Analysis of profits and losses 
Annual statement, farm . 

Balance sheet, defined 

Balance sheet, six column 

Bank account, how to open 

Bank book .... 

Bank draft .... 

Banking ..... 

Bank, its functions . 

Bank pass book, proof 

Bills Payable, defined 

Bills Payable, rules for journalizing 

Bills Receivable, defined . 

Bills Receivable, rules for journalizing 

Bookkeeping definition of 

Bookkeeping, object of 

Business forms 

Business letter 

Business, The, defined (illustrative examples) 

Business transaction, defined 

Cash, defined .... 

Cash book . . . .• 

Cash book, farm 

Cash book — ledger, farm set II 

Cash book, special column 

Cash report 

Cash statement, farm 

Cash summary 

Charged, meaning of 

Check, as receipt 

Check, certified 

Check, defined 

Check, illustrated 

Check book, illustrated 

Columnar books 

Compound journal entry 

Continuous annual statement 

Contract, defined 

181 







Page 


par. 


50 


32 


par. 


86 


52 


par. 


45 


31 


par. 


41 


30 


par. 


54 


35 


les. 


39 


108 


les. 


53 


161 


par. 


77 


51 


les. 


24 


61 


par. 


105 


69 


les. 


30 


70 


par. 


124 


83 


les. 


30 


69 


par. 


107 


72 


les. 


38 


104 


par. 


101 


64 


par. 


103 


65 


par. 


101 


64 


par. 


102 


64 


par. 


2-4 


7 


par. 


4 


7 


les. 


34 


80 


les. 


32 


74 


par. 


53 


33 


par. 


1 


7 


par. 


41 


30 


par. 


16 


13 


les. 


38 


100, 101 


les. 


46 


125 


par. 


14 


9 


par. 


15 


13 


les. 


38,39 


104, 106 


les. 


39 


107 


par. 


53 


33 


par. 


104-105 


69 


par. 


109 


72 


par. 


122 


81 


les. 


30 


71 


les. 


30 


71 


par. 


13 


9 


par. 


64 


46 


les. 


37 


98 


par. 


126 


87 



182 



INDEX 



Contracts, Statute of Frauds requirements 

Corrections, method of making 

Cost .... 

Cost accounting 

Cost records 

Cost records, importance of form 

Cost records of crops 

Counter books, for farm sales 

Coupons, for farm sales 

Credit .... 

Credit, purchase on . 

Crop records 

wheat .... 

oats .... 

barley .... 

vetch .... 

rye . . . • 

clover .... 

timothy . ' . 

kale .... 

corn .... 

rape .... 

artichokes 

clover pasture 

field peas 

timber and pasture 

potatoes 

orchard and garden 
Crops, feed, how measured or estimated 



Debit 

Debiting and crediting, rules for 
Depositing, importance of prompt 
Deposit ticket, illustrated 
Depreciation .... 
Depreciation, defined 
Depreciation, methods of computing 
Depreciation, table for computing 
Desk, office .... 
Discounting notes 
Double Entry, defined 
Double ruling, importance of . 

Egg record . ■ . . ' • 
Entry, defined .... 
Errors, locating in trial balance 
Estimates of household expenses 
Expense account, explained 

Farm accounts with persons 

Farm plot — set I 

Farm plot — set II . 

Farm set III, introduction to . 







Page 


par. 


126 


87 


par 


65 


46 


par. 


39 


27 


par. 


28 


22 


les. 


49 


146 


les. 


49 


146 


les. 


50 


150 


les. 


40 


109 


les. 


40 


109 


par. 


43-52 


30-33 


par. 


41 


30 


les. 


50 


152 


les. 


50 


153 


les. 


50 


153 


les. 


50 


153 


les. 


50 


154 


les. 


50 


154 


les. 


50 


154 


les. 


50 


154 


les. 


50 


154 


les. 


50 


- 154 


les. 


50 


155 


les. 


50 


155 


les. 


50 


155 


les. 


50 


155 


les. 


50 


155 


les. 


50 


156 


les. 


50 


156 


les. 


50 


151 


par. 


43-52 


30-33 


par. 


44 


31 


par. 


108 


72 


les. 


30 


70 


par. 


37 


26 


les. 


48 


142 


les. 


48 


142 


les. 


48 


144 


par. 


127 


88 


par. 


110 


72 


par. 


46-49 


32 


par. 


89 


53 


par. 


33 


24 


par. 


62 


46 


par. 


71 


50 


par. 


21 


17 


par. 


75 


50 


les. 


40 


108 


les. 


37 


97 


les. 


45 


124 


les. 


36 


93 



INDEX 



183 



Farm set II 

Feed record 

File, box . 

Filing bills 

Filing vouchers, method of 

Financial statement 

Financial statement, farm 

Food record 

Form, importance of 

Forwarding totals 

Gain, defined 

Gross cost, defined . 

Household accounts 

Indexing . 
Indorsement, blank 
Indorsement, full 
Indorser, contract of 
Indorser, irregular, defined 
Indorser, regular, defined 
Inventory 

Inventory, a liability 
Inventory, a resource 
Invoice, blank pads . 
Invoice, defined 
Irregular indorser, defined 

Journal, illustrated . 
Journalizing, defined 



Labor report 

Ledger, defined 

Ledger, illustrated 

Ledger, object of closing 

Ledger, Rockefeller's 

Letter, accompanying inclosures 

Letter, form of 

Letter, ordering goods 

Letter, parts of 

Letterhead 

LiabiHty, defined 

Live stock records 

cattle and dairy 

horses . 

hogs . g . 

poultry 

sheep 
Loss, defined 



Maker of a note, defined . 

Manure, how treated in cost accounts 







Page 


les. 


43 


115 


les. 


49 


149 


par. 


127 


88 


par. 


25 


18 


les. 


46 


125 


par. 


40 


27 


les. 


36-53 


94 


par. 


33 


24 


par. 


57 


36 


par. 


19 


14 


par. 


35,81 


26, 51 


par. 


39 


27 


par. 


20 


17 


par. 


68 


48 


par. 


122 


81 


par. 


122 


81 


par. 


105E, 122 


71,81 


par. 


122 


81 


par. 


122 


81 


les. 


44 


117 


par. 


36 


26 


par. 


36 


26 


par. 


120 


80 


par. 


120 


80 


par. 


122 


81 


les. 


10 


38-40 


par. 


61 


46 


les. 


49 


148 


par. 


51 


32 


les. 


11 


41-43 


par. 


85 


52 


par. 


14 


9 


par. 


118 


78 


par. 


115,116 


76, 77 


par. 


117 


77 


par. 


114 


75 


par. 


112 


74 


par. 


34,80 


26, 51 


les. 


51 


157 


les. 


51 


157 


les. 


51 


157 


les. 


51 


157 


les. 


51 


158 


les. 


51 


158 


par. 


35,81 


26, 51 


par. 


98 


64 


les. 


49 


147 



184 



INDEX 



Materials for bookkeeping work 
Maturity of a note, how found 
Merchandise, defined 

Net cost, defined 
Net present worth, defined 
Net worth, defined . 
Note, promissory 

Office equipment 
Original entries 

Paging, explained 
Partnership agreement 
Payee, of a note, defined . 
Personal accounts, how closed . 
Personal accounts, rules for journaliz 
Postal information 
Posting, defined 
Poultry accounts 
Private personal accounts 
Profits and losses, analysis of . 
Promissory note, defined 
Proof trial balance, defined 
Property, rules for journalizing 
Proprietor, rules for journalizing 
Proprietor's account, how to close 

Receipt, blank books 

Receipt, check as . . . 

Receipt, proof of payment 

Red ink entries, meaning of . ' 

Regular indorser, defined 

Resource, defined 

Resources and liability, statement of 

Rules for journalizing, general . 

Ruling, directions for 

Sales slips .... 

Sample journal entry 
Saving, value of . . . 

Signature, imp'^.rtance of . 
Single entry, tlefined 
Statements, financial, illustrated 
Stationery, business . 

Stock set 

Students' accounts . 

Success, foundation for 

Summaries, cost 

Summary of principles of debits and credits 



Page 



par. 


7 


8 


les. 


28 


67 


par. 


41 


30 


par. 


39 


27 


par. 


38 


26 


par. 


78 


51 


par. 


97 


64 


les. 


34 


88 


par. 


5,62 


: 7,46 


par. 


67 


48 


par. 


44 


31 


par. 


98 


64 


par. 


92, 93, 94 


53 


par. 


54 


35 


par. 


118 


78 


par. 


66 


48 


par. 


26 


i 22 


par. 


8 


9 


les. 


39 


108 


par. 


97 


64 


les. 


22 


59 


par. 


54 


35 


par. 


54 


35 


par. 


91 


53 


par. 


125 


86 


par. 


104 


69 


par. 


125 


86 


par. 


90 


53 


par. 


122 


81 


par. 


34,80 


26, 51 


les. 


39 


107 


par. 


55 


35 


par. 


6 


8 


par. 


120 


80 


par. 


63 


46 


par. 


9 


9 


par. 


105 


69 


par. 


46 


32 


les. 


11 


44 


par. 


113 


75 


les. 


12 


46 


par. 


15 


13 


par. 


10 


9 


les. 


52 


159 


par. 


54 


35 



MAY 22 \9^3 








^iillil 






